Court Opinion

ID: 4250167
Source: CourtListenerOpinion
Date Created: 2018-02-28 21:23:39.30926+00
Date Added: 2024-06-11T14:44:13.541986
License: Public Domain

IN THE SUPREME COURT OF IOWA
                             No. 02 / 06-1362

                             Filed May 25, 2007

IOWA SUPREME COURT ATTORNEY
DISCIPLINARY BOARD,

      Appellee,

vs.

GREGORY ALAN JOHNSTON,

      Appellant.

________________________________________________________________________
      On review of the report of the Grievance Commission.

      Grievance Commission reports that respondent has committed

ethical misconduct and recommends a suspension from the practice of

law. LICENSE SUSPENDED.

      Mark McCormick of Belin Lamson McCormick Zumbach Flynn,

Des Moines, for appellant.

      Charles L. Harrington and Wendell J. Harms, Des Moines, for

appellee.
                                    2

CADY, Justice.

      The Iowa Supreme Court Attorney Disciplinary Board (Board)

charged Gregory Alan Johnston with numerous violations of the Iowa

Code of Professional Responsibility for Lawyers for his involvement in a

business transaction with a client.      The Grievance Commission of the

Supreme Court of Iowa (Commission) found Johnston violated the Iowa

Code of Professional Responsibility for Lawyers and recommended he be

suspended from the practice of law for a minimum period of six months.

Upon our review, we indefinitely suspend Johnston’s license to practice

law with no possibility of reinstatement for three months.

      I. Background Facts and Proceedings.

      Johnston is an Iowa lawyer. He was admitted to practice law in

1977, and is a sole practitioner in Muscatine.               He was publicly

reprimanded in 1991 for failing to file Iowa and federal income tax

returns from 1984 to 1988. He has no other record of discipline. He is

known as a bright and innovative advocate by other lawyers in his

community.

      Johnston    represented   Nelson    Electric,   Inc.     In   2000,   the

corporation obtained a judgment of $4000 against a Muscatine building

contractor named Thomas Corcoran. In 2001, the corporation obtained

a second judgment against Corcoran for $1170.84.                Several other

individuals and businesses also acquired judgments against Corcoran

during this period of time. One of the creditors, Jeff King, Inc. (King),

executed on its judgment against two parcels of real estate owned by

Corcoran in Muscatine, known as the blue building and the red building.

The properties were subsequently purchased by King at a sheriff’s sale

for $5868.   Corcoran was allowed a period of 180 days to redeem the

property.    The Nelson Electric judgment of $4000 was the only senior
                                    3

lien, and King paid the judgment, plus interest.     Upon the apparent

insistence of Nelson Electric, Johnston then set out to protect the

remaining Nelson Electric judgment of $1170.84, in a rather complex

and unusual manner.

      Johnston first proposed to protect Nelson’s junior judgment by

preparing an involuntary bankruptcy petition against Corcoran, but

eventually decided to personally meet with Corcoran to discuss the

situation. Johnston met with Corcoran on February 17, 2002, the day

before Corcoran’s right of redemption would expire, in an Illinois jail

where Corcoran was imprisoned.          After discussing the situation,

Johnston and Corcoran mutually agreed the best course of action was

for Corcoran to assign his right of redemption to Johnston as agent for

Nelson Electric, with Corcoran reserving the right to purchase the

property back within a certain amount of time. Johnston believed this

would allow Nelson Electric to protect its judgment by redeeming the

property, and would also give Corcoran the ability to retain his property

by buying it back at a later date. Accordingly, Corcoran signed a written

acknowledgment indicating the assignment of his redemption rights to

Johnston. The writing did not mention Corcoran’s right to purchase the

property back, or explain whether Johnston was acquiring redemption

rights for himself or as an agent for Nelson Electric. Johnston then paid

Corcoran all the money he had with him—$20 in cash—in part payment

of the $250 purchase price. Johnston told Corcoran he would visit him

the next day so the parties could complete their business.

      The next day, the day Corcoran’s period of redemption would

expire, Corcoran and Johnston discussed the matter again.      Johnston

told Corcoran he believed the interest rate imposed on the judgment by

King, the creditor who purchased the property at the sheriff’s sale, was
                                      4

excessive.    Johnston offered to represent Corcoran in an action to

challenge the interest rate, which, if successful, would reduce the

amount needed to redeem the properties. In doing so, he mentioned it

would conflict with his representation of Nelson Electric.

      Johnston then obtained the oral consent of Nelson Electric to

represent Corcoran, and visited Corcoran later in the day to finalize the

assignment of Corcoran’s right of redemption and to represent Corcoran

to challenge the interest rate.      Johnston provided Corcoran with a

written letter that disclosed the conflict of interest presented by

representing him while also representing Nelson Electric.      The letter

disclosed that Johnston was only representing Corcoran to reduce the

interest rate, and further stated that Johnston might ultimately

purchase the properties. Johnston also had Corcoran sign two warranty

deeds that he “anticipated using to transfer the title.”      The deeds,

however, did not name a grantee. At the time Johnston did not know if

he, Nelson Electric, or a partnership between them would take title to the

properties.

      Later that day Johnston filed papers with the district court to

redeem the properties. In doing so, Johnston deposited $11,497.01 with

the clerk of court. Johnston obtained the funds to redeem the property

from Nelson Electric, even though the redemption amount included

$4556.14 to reimburse King for the amount it had previously paid Nelson

Electric in discharging Nelson Electric’s senior lien.

      Johnston also filed an objection to the amount of the redemption,

and asked the clerk to hold the redemption funds until the court

determined the correct amount of the redemption. In all documents filed

with the court, Johnston identified himself as the attorney for Corcoran
                                     5

and that he was filing the redemption and objection on behalf of

Corcoran.

      Johnston then promptly met with King’s attorney to begin

negotiations over the objection to the redemption amount. On February

28, Johnston filed a stipulation in the King foreclosure action indicating

King and Corcoran agreed the amount of redemption was $10,632.32,

and the excess amount deposited with the clerk would be payable to

Johnston as the attorney for Corcoran. On March 1, the district court

approved the redemption amount and ordered the funds to be

distributed.

      Around this same time Johnston discovered Corcoran had deeded

his interest in the blue building to a friend named Laura Enke.

Johnston promptly negotiated an agreement to purchase her interest for

$500 in exchange for a deed to the property. When the deed was signed

on March 25, 2002, it did not name a grantee. By the time the deed was

recorded on January 6, 2003, Welch Apartments, an entity owned by

Johnston, was named the grantee.

      Corcoran contacted Johnston by letter on April 5, 2002 to clarify

the agreement regarding the property.       In the letter he indicated he

would like to sell the red building for $60,000 to pay off all his debts. He

also intimated he would like Johnston to rent the blue building to pay

the building’s taxes and insurance, with remaining proceeds placed into

his checking account. Corcoran said he would sign a power of attorney

to enable Johnston to act for him, and concluded by saying, “I hope you

hang with me and charge or pay whatever you feel necessary.”

      Johnston and Corcoran subsequently spoke over the phone about

the letter. Johnston said it was not his job to find a buyer for Corcoran,

and that he would not be his manager for the properties. Corcoran next
                                           6

communicated with Johnston in November of 2002.                        At this time

Corcoran sent another letter to Johnston and stated he hoped Johnston

was still helping him, and that “we should get down to business.”

Corcoran specifically wanted Johnston to try to sell his properties to Tom

Meeker for $65,000, and told Johnston he could keep $40,000 from the

sale.    Johnston did not respond to this letter because he believed

Corcoran’s right to buy back the properties had expired.1                   Johnston

acknowledged, however, that it was “probably very poor practice to not

respond,” and that he “should have responded and said . . . you’re

wrong, you’re done.”

        Corcoran mailed another letter to Johnston in December of 2002.

In this letter, Corcoran told Johnston that Meeker had agreed to buy his

properties for $60,000, and that Johnston could keep $40,000 of it to

pay off Corcoran’s debts. Corcoran also mentioned that he had a year in

which to buy back the property according to their agreement, and that he

“still [has] two months to spare.” Johnston again did not respond to this

letter. He believed Corcoran was attempting to extract money from him,

and discontinued further discussions with him.

        Nelson Electric, the entity whom Johnston claimed was the moving

force for the legal maneuvering to collect the judgment of $1170.84, later

decided it did not wish to pursue the collection any further. As a result,

Johnston acquired the interest of Nelson Electric in the properties by

giving Nelson Electric a credit of $20,000 for the legal services it owed

        1Notably,  Johnston claims Corcoran’s right to redeem the property was only
extended by six months pursuant to their agreement entered February 18, 2002. Thus,
Johnston believes Corcoran’s right to redeem the property expired in August of 2002,
and therefore Johnston and Nelson, or whomever the grantee of the deeds would
become, were the owners of the property. Their agreement in February of 2002
concerning Corcoran’s right to redeem the properties was not reduced to writing, and
therefore there is nothing that states whether Corcoran’s right to redeem the properties
was extended by six months as Johnston claims or by one year as Corcoran claims.
                                       7

him.    This allowed Johnston to continue to pursue his interest in the

property.    The properties remain encumbered by substantial debt and

are the subject of current litigation to quiet title.

       II. The Board’s Complaint.

       The Board charged Johnston with multiple violations of the Iowa

Code of Professional Responsibility for Lawyers.            These violations

included DR 1-102(A)(1) (lawyer shall not violate a disciplinary rule), DR

1-102(A)(6) (lawyer shall not engage in other conduct that adversely

reflects on the fitness to practice law), DR 2-101(B)(4)(a) (lawyer shall not

engage in the in-person or telephone solicitation of legal business), DR 2-

103(A) (lawyer shall not recommend his or her own employment), DR 2-

104(A) (lawyer shall not accept employment resulting from unsolicited

advice), DR 5-101(A) (lawyer shall not accept employment under certain

circumstances unless client consents and there is full disclosure), DR 5-

103(A) (lawyer shall not acquire a propriety interest in client matters), DR

5-103(B) (lawyer shall not advance or guarantee financial assistance to

clients), DR 5-104(A) (lawyer shall not enter into a business transaction

with a client when there are differing interests), DR 5-105(B) (lawyer

shall decline proffered employment in some circumstances), DR 5-105(C)

(lawyer shall not continue multiple employment in some circumstances),

DR     5-105(D)   (lawyer   may    represent    multiple   clients   in   some

circumstances), DR 7-101(A)(3) (lawyer shall not intentionally prejudice

or damage a client), and DR 7-102(A)(8) (lawyer shall not knowingly

engage in other illegal conduct or conduct contrary to a disciplinary

rule). Johnston admitted he violated DR 2-101(B)(4)(a), DR 2-103(A), DR

2-104(A), and as a result also admitted he may have violated DR 1-

102(A)(1).
                                     8

      The Commission found Johnston violated all of these rules except

DR 2-104(A), DR 5-103(B) and DR 7-101(A)(3).          It made several key

findings to support the violations. The Commission found Johnston not

only represented Corcoran in the action to challenge the interest rate,

but also sought out Corcoran and ultimately represented him in the

redemption of the property. It also found the representation continued

after the interest rate matter was settled, and that Johnston not only

inserted his own interests into the transaction, but represented the

differing interests of Nelson Electric and Corcoran at the same time.

Finally, the Commission found Johnston failed to fully compensate

Corcoran for the purchase of his redemption rights in the properties.

      The Commission recommended Johnston be suspended from the

practice of law with no possibility of reinstatement for six months. It also

recommended Johnston pay Corcoran $230 to satisfy the purchase of

assigning the redemption rights.

      On our review, Johnston challenges the Commission’s conclusions

that he violated certain disciplinary rules. He also attacks certain factual

findings made by the Commission. Ultimately he requests we impose a

sanction that does not include the suspension of his law license.

      III. Standard of Review.

      We review attorney disciplinary matters de novo. Iowa Supreme Ct.

Bd. of Prof’l Ethics & Conduct v. Bernard, 653 N.W.2d 373, 375 (Iowa

2002).   We give the findings of the Commission weight, but are not

bound by them. Id.

      IV. Contested Factual Findings.

      Johnston alleges the Board failed to establish numerous findings

made by the Commission. We consider these claims in addressing the

disputed violations raised by Johnston on appeal.
                                             9

       V. Violations.

       We only address the violations Johnston contests on appeal.                       In

the end, we agree he violated the disciplinary rules as determined by the

Commission.

       A. Solicitation.

       It is axiomatic in Iowa that a lawyer may not engage in the in-

person solicitation of legal business. DR 2-101(B)(4)(a). The Commission

found Johnston violated this rule of ethics when he offered to represent

Corcoran in a claim to challenge the amount of the redemption.

Johnston asserts the ethics prohibition does not apply because he did

not solicit Corcoran for the purpose of pecuniary gain.

       Even assuming Johnston did not solicit Corcoran for pecuniary

gain, DR 2-101(B)(4)(a) prohibits in-person solicitation “under any

circumstance.”2           DR 2-101(B)(4)(a).        We have no pecuniary gain

requirement. This approach recognizes that face-to-face solicitation by

lawyers is “a practice rife with possibilities for overreaching, . . . undue

influence, and outright fraud.” Zauderer v. Office of Disciplinary Counsel,

471 U.S. 626, 641, 105 S. Ct. 2265, 2277, 85 L. Ed. 2d 652, 666 (1985).

The circumstances of this case, looking back, breathe life into these
unwanted possibilities and confirms our strict approach against in-

person solicitation.         Johnston violated DR 2-101(B)(4)(a) when he

recommended         his    employment       to   challenge      the   amount       of   the

redemption.

       2
         Rule 7.3 of the ABA’s Model Rules of Professional Conduct generally prohibits
solicitation “when a significant motive for the lawyer’s doing so is the lawyer’s pecuniary
gain.” Model Rules of Prof’l Conduct R. 7.3 (2003). That is not the approach under DR
2-101(B)(4)(a), or the approach under our new rules. See Iowa R. of Prof’l Conduct
32:7.3(a) (“A lawyer shall not by in-person, live telephone, or real-time electronic contact
solicit professional employment from a prospective client.”).
                                     10

      B. Fitness to Practice.

      Ethical misconduct is defined in many ways under the rules of

professional responsibility. DR 1-102 identifies the types of misconduct,

including “illegal conduct involving moral turpitude,” DR 1-102(A)(3),

“conduct involving dishonesty, fraud, deceit or misrepresentation,” DR 1-

102(A)(4), conduct “prejudicial to the administration of justice,” DR 1-

102(A)(5), and “any other conduct that adversely reflects on the fitness to

practice law,” DR 1-102(A)(6) (emphasis added). This approach of listing

the various forms of misconduct followed by “other” conduct reveals the

broad nature of misconduct involving activities that adversely reflect on

the fitness to practice law. It involves conduct other than the specific

conduct identified in the rule, and focuses on matters that “lessen[]

public confidence in the legal profession.” Iowa Supreme Ct. Bd. of Prof’l

Ethics & Conduct v. Marcucci, 543 N.W.2d 879, 882 (Iowa 1996).            We

have also said it “implicates more than legal competence.              It also

embraces one’s character and one’s suitability to act as an officer of the

court.” Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Shinkle, 698
N.W.2d 316, 324 (Iowa 2005) (citation omitted).

      The Commission found Johnston’s conduct during the transaction

violated this disciplinary rule in several ways, including pursuing the

redemption in Corcoran’s name after attaining an assignment of his right

of redemption, backdating the assignment, failing to pay Corcoran the

amount promised for the assignment, taking deeds to the property

without a designated grantee, and failing to record the deeds to the

property.   Johnston claims this conduct either did not occur or falls

short of conduct that adversely reflects on fitness to practice law.

      We disagree with Johnston. He violated DR 1-102(A)(6) in at least

one of the respects found by the Commission. Generally, the conduct
                                      11

cited by the Commission to support the violation of the rule may or may

not adversely reflect on Johnston’s fitness to practice law. We are not

prepared to say this conduct alone reflects adversely on his fitness to

practice law.        Only if this conduct is accompanied by an illegal or

unethical purpose, motive or intent are we prepared to say he violated

the rule.    The commission obviously found such an intent when it

rejected Johnston’s testimony that Corcoran waived the remaining

payment in lieu of Johnston’s fee for representing Corcoran.       We give

weight to this finding and come to the same conclusion in our de novo

review of the record.

      A lawyer who fails to satisfy a financial obligation under a contract

based on a false claim that the obligation was waived in exchange for

legal services engages in conduct that adversely reflects on the practice

of law. No attorney should assert loose, unsupported claims for attorney

fees as a means to avoid contractual obligations.        We agree with the

Commission that Johnston engaged in conduct that adversely reflected

on his fitness to practice law in violation of DR 1-102(A)(6).

      C. Acquiring Interest in Litigation.

      DR 5-103(A) prohibits a lawyer from acquiring “a proprietary

interest in the cause of action or subject matter of the litigation being

conducted for the client,” subject to exceptions not applicable in this

case. DR 5-103(A). The Commission found Johnston violated this rule

by representing Corcoran when he had purchased the assignment of his

redemption rights. Johnston claims he did not violate the rule because

there was no “litigation being conducted” for Corcoran once Johnston

acquired Corcoran’s redemption rights. In other words, Johnston claims

he acquired Corcoran’s interest in the litigation prior to representing him

in the litigation.
                                      12

      Lawyers are generally prohibited from injecting themselves into the

legal affairs of clients. See Comm. on Prof’l Ethics & Conduct v. Bitter,

279 N.W.2d 521, 523 (Iowa 1979).            While DR 5-104 addresses the

prohibition against engaging in business with clients, DR 5-103(A)

specifically targets the acquisition of a proprietary interest in litigation

being conducted by an attorney for a client. Recognizing the limitation in

DR 5-103(A), Johnston attempts to sidestep the rule with his claim that

Corcoran had no actual legal interest in the pending foreclosure litigation

once Corcoran became his client.

      While we recognize the obvious inconsistency in Johnston’s claim,

the record shows Johnston inserted himself into Corcoran’s litigation and

agreed to represent Corcoran in the litigation as a part of the same

transaction. Clearly, Johnston’s conduct violated DR 5-103(A). The rule

captures conduct where a lawyer is both a litigator for a client in

litigation and a party to the litigation.

      D. Conflict of Interest.

      A client has a right to expect loyalty and independent judgment

from an attorney. See Comm. on Prof’l Ethics & Conduct v. Minette, 499
N.W.2d 303, 305 (Iowa 1993). Many specific rules embrace this concept,

including the final three disciplinary rules Johnston argues he did not

violate: DR 5-101(A) (refusing employment when professional judgment

may be affected by attorney’s own interest), DR 5-104(A) (limiting

business relations with clients), and DR 5-105(C) and (D) (multiple client

representation).   These rules do not apply if client consent has been

obtained after full disclosure.     See DR 5-101(A); DR 5-104(A); DR 5-

105(C), (D).

      The Commission found each rule was violated based on Johnston’s

multiple representation of Nelson Electric and Corcoran, as well as the
                                        13

presence of his own interests, including his apartment operation.         We

agree the multiple interests involved in the transaction implicated DR 5-

101(A), DR 5-104(A) and DR 5-105(C), (D).           We are not persuaded by

Johnston’s argument that he did not violate DR 5-105(C) because he

stopped representing Corcoran before he purchased Enke’s deed to the

blue      building.    Even    though    Johnston    may   have   ended   his

representation of Corcoran before acquiring a deed to the property, he

still represented Corcoran and Nelson Electric at a time when the

exercise of his “independent professional judgment on behalf” of one

client would be adversely affected by the representation of the other

client.     DR 5-105(C).      During this time, both Nelson Electric and

Corcoran had competing interests in the redemption of the property.

Johnston could not exercise independent judgment for one client without

adversely affecting his representation of the other. Because the consent

obtained by Johnston failed to satisfy the full disclosure standard, which

he admits, Johnston violated these disciplinary rules. See Iowa Supreme

Ct. Bd. of Prof’l Ethics & Conduct v. Fay, 619 N.W.2d 321, 326 (Iowa

2000).

          VI. Discipline.

          “The nature of the alleged violations, the need for deterrence, the

protection of the public, maintenance of the reputation of the [Bar] as a

whole, and the respondent’s fitness to continue” to practice law are all

relevant when determining the appropriate discipline. Iowa Supreme Ct.

Bd. of Prof’l Ethics & Conduct v. Waters, 646 N.W.2d 111, 113–14 (Iowa

2002).      In addition, all aggravating and mitigating circumstances are

considered. Id. Ultimately, discipline is imposed based on the particular

facts of each case. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.

McKittrick, 683 N.W.2d 554, 563 (Iowa 2004).
                                    14

      We disagree with the Commission’s factual finding that there are

no mitigating circumstances in this case.       We believe the testimony

demonstrated Johnston to be a generally honest lawyer.            See Iowa

Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Isaacson, 565 N.W.2d 315,

317 (Iowa 1997) (“We consider a lawyer’s general character for honesty . .

. in applying sanctions.”). In addition, he acknowledged he violated our

disciplinary rules in certain respects. See Iowa Supreme Ct. Bd. of Prof’l

Ethics & Conduct v. Tofflemire, 689 N.W.2d 83, 93 (Iowa 2004) (“A

mitigating factor is the attorney’s recognition of some wrongdoing.”).

Furthermore, the prior discipline imposed on Johnston carries little

weight as an aggravating factor under the circumstances of this case. See

Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Hohenadel, 634
N.W.2d 652, 656 (Iowa 2002) (recognizing a previous reprimand was an

aggravating   circumstance     “warranting    more    severe    discipline”).

Johnston’s previous discipline was imposed more than eighteen years

ago, was based on conduct unrelated to the present misconduct and no

other discipline has been imposed since the past misconduct.

      The misconduct engaged in by Johnston was unusual, and there is

little precedent to serve as a guide in the imposition of discipline.

Generally, sanctions in cases involving improper business transactions

between lawyers and clients range from a public reprimand to revocation.

Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Wagner, 599 N.W.2d
721, 730 (Iowa 1999). While egregious violations of the canon 5 conflict

of interest rules have resulted in lengthy periods of suspension, other

violations have resulted in suspensions ranging from one to three

months. See Iowa Supreme Ct. Attorney Disciplinary Bd. v. Clauss, 711
N.W.2d 1, 4–5 (Iowa 2006) (citing cases). Moreover, we have observed

that an attorney who engages in a series of actions that collectively reveal
                                     15

a general indifference to the core responsibilities owed to the client and

the legal system as a whole warrants a suspension. See, e.g., McKittrick,
683 N.W.2d at 563 (three-month suspension).

      Johnston violated numerous disciplinary rules by acquiring

ownership rights in property that was the subject of his clients’ litigation.

In the end, the overall transaction engaged in by Johnston illustrates the

reasons for the rules that discourage attorneys from becoming involved

in client matters and that require lawyers to serve clients with the

utmost loyalty and confidence.        Under all the circumstances, we

conclude Johnston should be suspended from the practice of law for a

period of three months.

      The Commission has requested that as part of Johnston’s sanction

we direct the clerk to tax the costs of reporting Corcoran’s depositions to

Johnston. Finding this request unopposed, we grant the Commission’s

request.

      VII. Conclusion.

      We suspend Johnston’s license to practice law in Iowa indefinitely,

with no possibility of reinstatement for a period of three months from the

date of filing of this opinion.   The suspension imposed applies to all

facets of the practice of law as provided by Iowa Court Rule 35.12(3), and

requires notification to clients as provided in Iowa Court Rule 35.21. The

costs of this proceeding are taxed against Johnston pursuant to Iowa

Court Rule 35.25(1), and Johnston shall pay the costs of Corcoran’s

depositions.

      LICENSE SUSPENDED.

      All justices concur except Ternus, C.J., who takes no part.