AVOIDING EVICTION FROM YOUR PRACTICE OR FORECLOSURE …

© Bruce A. Campbell 1999, all rights reserved.

AVOIDING EVICTION FROM YOUR PRACTICEOR FORECLOSURE OF YOUR LAW LICENSE

Presented By

Bruce A. CampbellLawson & Fields, P.C.

5323 Spring Valley RoadSuite 300

Dallas, Texas 75240(972) 661-5323 [voice](972) 661-5177 [fax]

e-mail: [email protected]

DALLAS BAR ASSOCIATIONREAL PROPERTY SECTION

April 12, 1999Dallas, Texas

© Bruce A. Campbell 1999, all rights reserved.

TABLE OF CONTENTS

Page

Overview 1

A. Conflicts of interest 2

B. Business interests 7

C. Failure to supervise and accepting projects without sufficient time 10

Supervision and Grievances 12

D. Failure to proofread 13

E. Negligence as to the location or amount of property 15

F. Negligence as to the determination of title 16

G. Negligence in failing to discover liens and encumbrances 17

H. Negligence in preparation or recording security interests 18

I. Making false statements 20

J. Assorted Disciplinary Issues 24

1. Competence, Diligence, & Clear Communication 25

2. Safeguarding Property 28

3. Unauthorized Practice 29

4. Compounding Problems 30

5. Compounding Grievance Problems Times Two 33

Conclusion 33

1

Mr. Campbell is a shareholder with the law firm of Lawson & Fields P.C. He chairs the ProfessionalLiability Section of Lawson & Fields, P.C. in Dallas, where he is a shareholder and practices in the area oflawyer conduct litigation. He is a former co-chair of the Dallas Bar Association’s Ethics Committee, amember of the Professional Liability Section of the Defense Research Institute, and a regional editor for theProfessional Liability Newsletter. Mr. Campbell is the chairman of the Texas Chapter of the ProfessionalLiability Underwriting Society.

2

The purpose of this paper is to discuss risk management issues for real estate practitioners. This paperis not intended to comment on, nor establish the standard of care, nor the standard of conduct forlawyers.

3

Real estate lawyers are second in claim frequency to personal injury plaintiff lawyers who generally haveabout 21% of the claims filed.

Page 1© Bruce A. Campbell 1999, all rights reserved.

AVOIDING EVICTION FROM YOUR PRACTICE ORFORECLOSURE OF YOUR LAW LICENSE

By: Bruce A. Campbell1

Overview2

Real estate lawyers, as a whole, are generally more expensive to insure than many

other areas of practice. Statistically across the country, real estate lawyers account for

about 15% of the total claims filed against lawyers.3 That level of claims frequency also

appears to hold true for Texas. Unlike other areas of practice, real estate lawyers are far

more likely to make a substantive error as opposed to having a claim arise out of an

administrative issue or a client relationship problem. In fact, almost 60% of all claims

against real estate lawyers are based on an oversight or misinterpretation of the law. It is


thus essential that real estate practitioners focus their practice on their particular area of

practice and pay careful attention to remaining current on state and federal laws affecting

their practice through continuing legal education.

So why is it more expensive to insure a real estate lawyer than many other types of

practice? Part of the answer is simple, when a real estate lawyer has a claim, it often

carries with it a very big price tag. Of course, the other part of the risk equation, claims

frequency, is also important.

Similar to other areas of practice, real estate lawyers can also be susceptible to

disciplinary complaints. As is discussed below, there are about a dozen aspects of real

estate practice that frequently give rise to malpractice claims or disciplinary proceedings,

many of which overlap substantially.

A. Conflicts of interest

Of all the potential traps for real estate lawyers, the most serious arise out of

conflicts of interest. Conflicts can arise based on the representation of the parties, the

subject matter of the transaction, the issues involved in the present representation and

4

Technically speaking, some commentators draw a distinction between when a lawyer acts adversely tothe interest of joint clients in a present transaction and when there is adversity between a lawyer’sconduct in a present representation and a prior representation. For purposes of this paper, I will refer toboth situations as a conflict or potential conflict.

5

It has long been recognized by real estate practitioners that they cannot be counsel for the buyer and sellerand participate in the negotiation of the terms of the transaction. Dillard v. Broyle, 633 S.W.2d 636 (Tex.App.--Corpus Christi, 1982).


based upon prior representations.4 The clearest example of a conflict situation occurs when

the lawyer jointly represents parties on both sides of the transaction.5

Historically, it has been common for a single real estate lawyer to be asked by the

buyer and seller of property to document their proposed sale of property. This usually

occurs after the terms of the contract have been negotiated by the parties. Joint

representations often occur in smaller transactions. The justification for using one lawyer

to represent both parties has been that it would not be economically feasible to bring in

separate counsel for both parties. The problem is that even in a small transaction, there can

be significant issues that should be negotiated and resolved. More often than not, lay

buyers and sellers typically do not consider all of the relevant legal issues when they are

negotiating the terms of the transaction. They understand the business issues, but they

expect their lawyer to handle the legal “technicalities”. Thus, for example, if there is an

adverse tax consequence that the buyer and seller have not recognized, the question can

arise whether the lawyer may raise the issue. Similarly, there can be a number of other


issues that can arise in a simple transaction, that may affect how the transaction should be

structured. Oftentimes the mere raising of the issue by the lawyer will favor either the

buyer or the seller. I think the trend in the conflict of interest cases is that the likelihood

that a conflict will be found to exist is more likely today than in the past. And, it is risky

for a real estate lawyer today to jointly represent both the buyer and the seller, even if the

terms of the transaction have been “fully” negotiated by the buyer and the seller.

Nevertheless, an older case that does support the proposition that a lawyer may act

as a scrivener to “document” the intent of the parties can be seen in Dillard v. Broyle, 633

S.W.2d 636 (Tex. App.--Corpus Christi, 1982 writ ref’d n.r.e.). In Dillard, the lawyer jointly

represented the buyer and seller in a real estate sale. The lawyer was also named as the

trustee in the deed of trust securing the sale. After the sale was completed, the buyer

defaulted after making several payments. Eighteen months after the default, the seller

asked the lawyer trustee to post the property for foreclosure. The lawyer sent out notice

of foreclosure, notice that the debt had been accelerated, and that the property was posted

for foreclosure. The property was then sold at foreclosure sale to a third party. Thereafter

the lawyer was sued for malpractice and fraud by his former client, the buyer. The court

held that in the original representation there was not an impermissible conflict. The court

reasoned that the agreement was fully negotiated between the parties and after full

disclosure of the facts concerning the potential conflict, the attorney could properly

represent both buyer and seller in the real estate transaction. The court pointed out that


in this case, as in many other instances involving a small transaction, it was less expensive

for one lawyer to document the transaction. The court further pointed out there was no

evidence that either the buyer or the seller was dissatisfied with the representation they

received in the original sale transaction. The court stressed that the buyer was aware that

the lawyer was named as the trustee under the original deed of trust. The court found that

the lawyer’s representation of the buyer had been completed at the conclusion of the sale.

The court therefore concluded that the lawyer’s posting of the property for foreclosure was

not a conflict of interest.

Although Dillard is still viable law, it would be dangerous to blithely assume that

the conduct that was sufficient to defeat a malpractice claim in 1982 would be sufficient

today. A case that is suggestive of where conflict of interest law is heading is Baldassare

v. Butler, 604 A.2d 112 (N.J. App. 1992). In Baldassare, a lawyer represented the seller and

buyer in a sale of real estate. The contract for sale included a provision for obtaining

approval of a subdivision to be built on the property. Under the sales contract, the buyer

had the right to convey the property to a third party developer. The buyer and seller

signed a conflict of interest letter waiving the potential for conflicts which might arise by

having one lawyer represent both buyer and seller. Approval of the subdivision

apparently was delayed and the buyer assigned his rights under the contract to the

developer. The lawyer became aware of, and did not disclose, to the seller the fact that the

contract had been conveyed to the third party developer when the buyer asked for an

6

Of course, had the lawyer advised the seller of the conveyance of the contract to the developer, the sellerundoubtedly would not have granted the extension. In all probability, the lawyer then would have beensued by his client, the buyer, for engaging in a conflict of interest (i.e.) for “busting the deal.” Such is thenature of conflicts of interest. The lawyer is often caught in the crossfire between two malpractice claimsand can be sued by both unhappy clients.


extension of the contract to allow the approval process to be completed. The lawyer

testified at his malpractice trial that he had explained all of the potential conflicts of the

transaction to the buyer and seller. In holding that the lawyer had engaged in a conflict

of interest that was not cured by the waiver letter, the court pointed out that the lawyer by

failing to disclose the conveyance of the contract to the third party developer, had

participated in the negotiation of the terms of the contract of sale. This conduct the court

found was not a waivable conflict. The lawyer’s failure to disclose the fact of conveyance

of the contract to the third party developer was such an obligation that the lawyer had an

absolute obligation to disclose the information to the seller. By failing to do so, the

lawyer’s representation of the seller was materially limited by his responsibility to the

buyer. And, the lawyer was therefore liable for damages to his client and the seller.6

The significance of the Baldassare case is threefold. First, conduct that can generate

a conflict often arises well into the transaction and can sometimes be so subtle that it is

difficult to detect at the time. Second, some conflicts are not waivable -- even with a solid

conflicts waiver letter. Third, silence by a lawyer can sometimes be tantamount to an

affirmative misrepresentation to a client.


Conflicts of interest can also potentially give rise to a disciplinary action in addition

to the potential malpractice claim. For instance, in In Re Berkowitz, 642 A.2d 389 (N.J. 1994),

one partner in a large law firm represented a manufacturing company. He discovered that

another one of his partners was representing a residential developer that was endeavoring

to have the property surrounding the manufacturing client’s facility rezoned from

manufacturing to residential. When the president of the manufacturing company asked

the second partner about the rezoning effort, the second partner gave a vague response

that: “the planning and zoning hearing might occur sometime that month.” The next

evening the second partner appeared at the planning and zoning hearing ready to argue

for the new zoning change for his developer client. The manufacturing company objected

so the second partner did not “appear as counsel.” Instead, the second partner testified

as a principal of the residential developer seeking the rezoning of the property. The

rezoning was approved by the municipality and then later set aside in a judicial

proceeding. Thereafter, both partners from the same law firm were brought before the

local grievance committee and, initially, the grievances for conflict of interest against both

of them were dismissed. The Supreme Court of New Jersey, however, found that both

lawyers had violated the conflict of interest rules and assessed a public reprimand against

both of the lawyers. Notably, the court further criticized the lawyer representing the

residential developer because he had a business interest in the developer that the court

found exacerbated the effect of the conflict.


Real estate lawyers who violate the conflict of interest rules have also received more

serious disciplinary sanctions. For example, in In Re Stella, 1993 A.D.2d 235 (N.Y. App.

1993), a lawyer was disciplined for having represented a seller and a purchaser who were

brothers in the same real estate transaction. The lawyer was suspended for two years.

B. Business interests

Lawyers who receive or own a business interest in their client often draw

malpractice claims and grievances. Many insurance carriers will not insure a lawyer who

holds more than a small percentage interest in any given client. And, frequently lawyers

who own a business interest in their clients increase the severity of the claim asserted

against them, based on their business interest.

For instance, in Castillo v. First City Bank Corporation, 43 F.3d 953 (5th Cir. 1994), a

malpractice claim that was dismissed by the district court was reinstated against a lawyer

and the Keck, Mahin & Cate law firm. The lawyer had been retained to represent the

lender and a fiduciary who was hired by the bank to manage certain collateral securing

a letter of credit issued by the lender. In reinstating the malpractice claim against the

lawyer and his firm, the Fifth Circuit pointed out that the lawyer, after closing the

transaction, acted as de facto CEO soliciting buyers for mortgaged and unmortgaged

property, negotiated deals with mortgaged and unmortgaged property and arranged for

others to take over the administrative duties he was unable to perform himself relating to

7

See also In Re Berkowitz, supra. p. 4.


the collateral. The lawyer by acting as a CEO in the property administrator expanded the

potential of the claim being established against him and his law firm.7

Business dealings with clients did not yield as many grievances in Texas last

year as in the past. I suspect the reason for the small number of grievances last year

was that the economy in Texas had been very strong for at least five years. Thus,

clients probably felt little need to file a grievance -- “just fire the lawyer and move on

down the road.” However, no lawyer should be lulled to sleep by the present

economy. Doing business with clients and owning significant positions in client

businesses can be extremely hazardous from a grievance perspective. Remember every

transaction will ultimately be judged by the standard of what is fair and reasonable to

the client. In the last decade, it has been a rare lawyer who has satisfied this standard.

Texas Disciplinary Rule 1.08(a) provides:

(a) A lawyer shall not enter into a business transaction with a client unless:

(1) the transaction and terms on which the lawyer acquires the interestare fair and reasonable to the client and are fully disclosed in a manner whichcan be reasonably understood by the client;

(2) the client is given a reasonable opportunity to seek the advice ofindependent counsel in the transaction; and

(3) the client consents in writing thereto.

8

This particular lawyer had another grievance concurrently heard which probably accounts for part of thesanction against the lawyer.


Here are a few examples of lawyers who last year received disciplinary sanctions

under this rule:

! Lawyer sold an oil and gas interest to the complainant for more than $11,000.When a dispute arose over whether a payment was for attorney’s fees foranother matter or the oil and gas interest, the complainant requested a refundand the lawyer sued the complainant. Result: 12 month suspension, 6 monthsof which were to be actively served. Vol. 61 TX Bar J. 368.

! Lawyer in a meeting with a client regarding a revocation of the claimant’sprobation requested, and the client performed, a “sexual massage” for which theclient would be compensated. Lawyer paid the client for a portion of themassage and told her the rest would be applied to attorney’s fees. Result: 60month partially-probated suspension with the first 30 months actively served.8

Vol. 61 TX. Bar J. 368

! Lawyer and client entered a business transaction that was not fair or reasonableto the client. The client did not consent in writing to the transaction and was notgiven a reasonable opportunity to seek the advice of independent counselregarding the transaction in violation of R. 1.08. Result: 24 month suspension,1 month active suspension, 23 months probated. Vol. 61 TX Bar J. 788.

! Lawyer accepted personal loans from a client on seven occasions during 1993.Result: Public reprimand and must reimburse client $11,800. Vol. 61 TX BarJ. 964.


C. Failure to supervise and accepting projects without sufficient time

The twin perils of supervision defects and inadequate time to complete a project

have been the cause of malpractice problems for real estate lawyers. One area of real estate

practice that frequently has supervision or insufficient time problems is the area of

foreclosure practice. In the mid-1980s and early 1990s, the Texas economy was extremely

weak. There were huge numbers of defaults on loans secured by residential and

commercial property. Many Texas real estate lawyers were called upon by their lending

clients to assist with, or participate in, the foreclosure of properties throughout the state.

The vast majority of these foreclosures were nonjudicial foreclosures. Texas courts have

historically required strict compliance with the requirements for nonjudicial foreclosure.

Technical defects in these foreclosures were not uncommon. Thus, it is not surprising that

a number of real estate lawyers in the mid-1980s and early 1990s found themselves subject

to malpractice claims arising out of an alleged technical deficiency in the foreclosure.

For example, in Independent Life Insurance, Inc. v. Childs, 756 S.W.2d 54 (Tex.

App.--Texarkana, 1988, no writ), the law firm that was hired by the lienholder to foreclose

on the property failed to give the borrower notice of intent to accelerate the debt. At the

foreclosure sale, a third party purchased the property. The borrowers then filed suit to set

aside the foreclosure sale. In Childs, it is important to remember that over two years had

passed from the time of the sale until the time the law firm was sued for malpractice. In

reversing a summary judgment granted in favor of the law firm on the basis of the statute


of limitations, the Court of Appeals noted that there was no evidence of when the

lienholder discovered the facts establishing that a defect had occurred in the foreclosure.

The case was therefore remanded back to the trial court for trial on the malpractice claim.

Perhaps one of the more significant points that the Childs case makes is that in a

defective foreclosure, it can take years for the claim to ripen to the point where the statute

of limitations begins to run. Thus, a law firm could potentially have a claim that would

not ripen for many years after the alleged defect in the foreclosure had occurred.

Three years after the Childs decision, the Texas Supreme Court was called upon to

decide when limitations would begin to run in a malpractice case that followed on the

heels of a wrongful foreclosure suit. In Gulf Coast Investment Corp. v. Brown, 821 S.W.2d

159 (Tex. 1991), the Texas Supreme Court held that in a malpractice case arising after a

defective foreclosure, that the statute of limitations did not begin to run until the wrongful

foreclosure action was finally resolved. The Supreme Court applied the same reasoning

it had in an earlier case styled Hughes v. Mahanney & Higgins, 821 S.W.2d 154, 157 (Tex.

1991). In Hughes, limitations were tolled for the malpractice claim until the underlying

litigation was concluded. The court in Hughes reasoned that because the viability of the

second cause of action depended on the outcome of the first, it was inappropriate to

require the client to sue the lawyer prior to the time the underlying claim was resolved.

The significance of Gulf Coast is that it stretched the limitations period for a malpractice

claim relating to a wrongful foreclosure case until the wrongful foreclosure case was

9

See Campbell, “Of Greener Grass, Bigger Bucks and Open Septic Tanks -- Law Firm Breakups and Spinoffs,and Other Changes” 61 Tx. Bar J. 322 (April, 1998).


resolved. If we assume that a wrongful foreclosure case is only finally resolved by a

decision of the Texas Supreme Court, it is conceivable that the time from the defective

foreclosure until the statute of limitations begins to run could easily be 10 to 15 years. On

the other hand, if we assume that no wrongful foreclosure suit is filed, it is still conceivable

that the owner of the property could hold the property for more than a decade before

discovering that title to the property was clouded by the defective foreclosure. The lesson

that lawyers handling foreclosures should keep in mind is that malpractice claims arising

out of foreclosures can take an extremely long time to come to fruition. Based on the

substantial mobility of lawyers from one firm to another, a strong argument can be made

for obtaining “career coverage” from your malpractice carrier.9

SUPERVISION AND GRIEVANCES

Failure to supervise also carries with it a potential grievance component. More

particularly, for many years associates and non-lawyer support staff have been a fact of

life for many lawyers. There are many ways in which they can be helpful to their

supervising lawyer. Nevertheless, the ways that they can get the supervising attorney into

grievance trouble is almost innumerable. The most important thing a supervising lawyer

can do to protect himself is to have policies and procedures in place to make certain that

the non-lawyer staff and associates are doing the job they were hired to do and not


engaging in “extracurricular” conduct. Fortunately, most lawyers did not have a lot of

problems in this area last year. However, “high volume” type practices are susceptible to

this danger.

Texas Disciplinary Rule R. 5.03 provides:

With respect to a nonlawyer employed or retained by or associated with a lawyer:

(a) a lawyer having direct supervisory authority over the nonlawyer shallmake reasonable efforts to ensure that the person’s conduct is compatible with theprofessional obligations of the lawyer; and

(b) a lawyer shall be subject to discipline for the conduct of such a personthat would be a violation of these rules if engaged in by a lawyer if:

(1) the lawyer orders, encourages, or permits the conduct involved;or

(2) the lawyer:

(i) is a partner in the law firm in which the person is employed,retained by, or associated with; or is the general counsel of a government agency’s legaldepartment in which the person is employed, retained by or associated with; or hasdirect supervisory authority over such person.....

Here are a few examples of lawyers who faced disciplinary problems based on

supervision issues:

! Personal injury lawyer handling large number of cases, operated without a trustaccount and had several non-lawyer employees over whom the lawyer had directsupervisory control that were involved in and later convicted of insurance fraud.Lawyer failed to ensure that the employees’ conduct was compatible with hisprofessional obligations and ordered, encouraged or permitted their conduct.Result: 12 month suspension, fully probated. Vol. 61 Tx Bar J. 595.


! Lawyer had a business agreement with a non-lawyer assistant. The non-lawyerundertook a social security case (SSI) in the lawyer’s name working on itwithout the lawyer’s knowledge and charging attorney fees none of which wentto the lawyer. Non-lawyer also cashed the SSI checks in the lawyer’s name.Result: Public Reprimand. 61 Vol. Tx Bar J. 790.

D. Failure to proofread

Real estate lawyers handle a significant amount of documentation for even the

smallest real estate transactions. It is very important that in each transaction that the

transactional documents be carefully reviewed. Proofreading errors, however, do occur

and when they do, they can lead to a claim against the lawyer. For example, in Utica

Insurance Company v. Pruitt & Cowden, 902 S.W.2d 143 (Tex. App.--Houston [1st Dist.] 1995,

no writ), a lawyer prepared a loan modification agreement and a truth-in-lending

statement that erroneously had two different methods of calculating interest. The

borrowers defaulted on the loan before the modification took effect, and the substitute

trustee posted the property for foreclosure. Prior to foreclosing the property, the

borrowers sued the lender and the trustee to stop the foreclosure alleging that they did not

know what rate of interest to pay. The borrowers obtained a temporary injunction. They

also sought declaratory relief and damages of $1.7 million based on claims for breach of

contract, breach of fiduciary duty, defamation, the DTPA and the Texas debt collection

statute. All of these claims were allegedly caused by the discrepancy in the interest rate

applicable to the loan modification. The lender eventually settled with the borrower for

$125,000.00. The lender then sued its former lawyers for malpractice. The lawyers


challenged the proximate cause element in the malpractice case on the basis that the loan

modification error had nothing whatsoever to do with the posting of the property for

foreclosure because that occurred prior to the date the loan modification became effective.

The Court of Appeals reversed a summary judgment granted in favor of the lawyers on

proximate cause and remanded the case for trial. It is worth noting that it is unclear from

the Court of Appeal’s opinion whether the borrower paid the amount of principal but was

unsure about the amount of interest to pay or whether the borrower in fact made no

payment whatsoever. If we assume the borrower made no payment whatsoever, and the

loan was in default and to be foreclosed prior to the effective date of the modification

agreement, then it is extremely difficult to reconcile the court’s determination that there

existed a factual issue on the issue of proximate cause.

Nevertheless, the worst example of a proofreading defect occurred for some lawyers

outside the state of Texas. In Prudential Insurance Co. v. Dewey, Ballantine, Bush, Palmer and

Ward, 573 N.Y. S. 981 (N.Y. App. 1991), the amount loaned against the collateral was in

excess of $92 million. Nevertheless, when the transactional documents for the financing

were prepared they reflected that the amount of the collateral interest was “$92,000” as

opposed to “$92,000,000”. After the borrower filed bankruptcy, the lender asserted its

malpractice claim against its counsel, Dewey Ballantine. Thus, in Dewy Ballantine, a claim

against a very large law firm was created by the omission of three little zeroes to the left

of a decimal point.


E. Negligence as to the location or amount of property

Real estate lawyers have also been sued for malpractice for misdetermining the

amount of property or its location. For example, in Gavenda v. Strata Energy, Inc., 705

S.W.2d 690 (Tex. 1986), an attorney prepared a title opinion that misdetermined the

amount of an interest held by a royalty owner. The attorney concluded that the royalty

interest holder had a one-sixteenth (1/16) interest as opposed to a one-half (1/2) interest.

The client who hired the lawyer to prepare the title opinion was later sued by the royalty

holder for underpayment of royalties in an amount alleged to be $2.4 million. Ultimately,

the lawyer’s client was required to pay the underpaid royalty amounts. The court noted

in passing that the lawyer who prepared the title opinion was a third party defendant in

the case and that there would be a claim against him for failure to prepare the title opinion

properly.

The issue of the amount of damages that could be awarded against the attorney was

not reached by the court in Strata Energy, but it is worth considering. Would the measure

of damages caused by the lawyer’s defective title opinion be the amount of the under paid

royalty? The answer is probably not. Instead, damages would likely be based upon the

cost associated with not paying the royalty amounts promptly. Thus, interest and

potentially consequential damages associated with the failure to pay promptly would

probably be the measure of damages.

F. Negligence as to the determination of title

10

Interestingly, the lawyer in Nilson-Newery attempted to shift the blame for the opinion that there were 700acres instead of about 350 acres of property back to the principal. The lawyer explained that he had toldthe principal about the problems he had in trying to make the calculation of acreage because he had not beenauthorized to order a new survey. The Sixth Circuit summarily rejected this argument. The court pointedout that the lawyer had been hired to provide a title opinion. The lawyer, as the professional, was notallowed to shift the blame to the client for failing to detect his error.


Real estate lawyers have also been held responsible for negligently determining the

state of title. In Nilson-Newery Co. v. Ballou, 839 F.2d 1171 (6th Cir. 1990), a principal and

agent entered into an agreement that the agent was to buy 700 acres of land with coal

deposits for the principal. The agent’s lawyer was to perform the title work on the

property to be acquired and to make certain that the principal was getting 700 acres of

property. The attorney erred in his title work and it turned out that the principal, although

paying for 700 acres, only acquired about 350 acres of property. Nor did the property have

any coal. Under the agreement between the principal and the agent (of which the lawyer

had knowledge), the agent was to be compensated by being paid a share of future

proceeds from the sale of coal. Nevertheless, when the agent purchased the land, he failed

to disclose to his principal that he was making a secret profit from the sale to his principal.

The lawyer who also knew about this secret profit failed to disclose it to the principal.

Ultimately, the principal sued the attorney for malpractice for the errors in the title work

and for the secret profit. The jury agreed with the principal and the court of appeals

affirmed the judgment against the attorney.10

G. Negligence in failing to discover liens and encumbrances

11

Although the lawyer’s estate won on limitations in Vista Petroleum, the analysis that the Fort Worth Courtof Appeals engaged in to dismiss the claim against the estate of the malfeasant lawyer would probably notbe followed today. The reason is that after Vista Petroleum the Supreme Court modified the discovery rulewith respect to the statute of limitations. See Hughes and Gulf Coast, supra. p. 7-8.


Another basis for malpractice claims against Texas real estate attorneys is the failure

to find a lien or other encumbrance that affects the state of title for the particular property.

In Vista Petroleum Company v. Woodson, 598 S.W.2d 721 (Tex. App.--Ft. Worth, 1980, no

writ) a real estate lawyer was hired to perform a title search and record the deed

conveying the property free of liens to the purchaser. In performing the title search, the

lawyer failed to discover a prior deed of trust lien encumbering the property. Over four

years later, the client was contacted by a prior deed of trust lienholder and, in order for the

purchaser to avoid losing his interest in the property, he had to pay off the prior deed of

trust lien. The purchaser thereafter sued the lawyer’s estate and the lawyer’s former

partner for malpractice. The lawyer’s estate escaped liability on the basis of limitations.

The former partner, however, did not escape liability because he failed to raise limitations

as a defense.11 Thus, the innocent partner was ultimately held responsible based on

vicarious liability and was responsible for paying off the amount of the deed of trust lien

that his former partner failed to discover many years earlier.

In a similar case, an attorney was sued for malpractice because the title opinions he

was issuing were based on information that was six weeks out of date. The title certificates

he issued failed to identify prior liens filed during that six week period. In Gleason v. Title


Guaranty Co., 317 F.2d 56 (5th Cir. 1963), the attorney was ultimately held responsible for

the damages caused by the liens he failed to discover. See also Fragumar Corp. v. Dunlap,

925 F.2d 836 (5th Cir. 1991) (lawyer testified that he disclosed all liens that had attached

to the condominium project his client had invested in. Nevertheless, the jury found that

the lawyer had failed to advise his client of a second lien for which amount the lawyer was

held responsible in damages.)

H. Negligence in preparation or recording security interests

Given the potential opportunities for a misstep in the preparation or perfection of

liens, it is somewhat interesting that there are relatively few cases on this particular type

of error. Theoretically, the types of errors that could occur include:

! defective language in the transactional documents that failed toactually convey what was intended;

! a deed of trust that was filed in the wrong county;

! a deed of trust that included a description of the wrong property;

! a deed of trust that, while forwarded to the correct property recordsoffice for recording, was lost or never filed; or

! a deed of trust that was never sent to the recording office forrecording.

An example of a set of transactional documents that failed to convey what was

intended occurred in Cox v. Rosser, 579 S.W.2d 73 (Tex. App.--Eastland, 1979, writ ref’d

n.r.e.). In Cox, a partnership owned two grocery stores and the surrounding property. The

partnership dissolved and each of the partners was to take one store while remaining liable


for the debt secured by both stores. The lawyer prepared deeds allowing each of the

partners to convey one property to each other. The deeds, however, did not include a lien

provision so that if one of the partners defaulted on the debt, the other partner could

foreclose the interest of the defaulting partner. One of the partners defaulted on his

payments. By the time the other partner who continued to pay had sued to judicially

foreclose the defaulting partner’s interest, superior liens had attached to the property

based on the defaulting partner’s acts. The only thing that apparently saved this lawyer

in the subsequently filed malpractice lawsuit was the fact that the suit for malpractice was

filed too late and was barred by the statute of limitations.

An example of the problems that can occur when a deed of trust is not properly

recorded can be seen in Boatwright v. Texas American Title Company, 790 S.W.2d 722 (Tex.

App.--El Paso, 1990, writ dismissed). In Boatwright, a purchaser bought a piece of property

giving a note and deed of trust. The purchaser immediately “flipped the property” to a

third party. In the sale of the property to the third party, a warranty deed was executed

that failed to mention the prior encumbrance of the original sale. The sale to the third

party was for cash plus a note and deed of trust. In the second transaction, the deed of

trust was never recorded. The third party defaulted on the payments, and subsequently,

the original purchaser hired a lawyer to foreclose the interest of the third party. The

foreclosure lawyer discovered that the deed of trust to secure the second sale was never

recorded. Nevertheless, the foreclosure lawyer sent out letters with false information


stating that he would “foreclose” under the deed of trust. The foreclosure lawyer in his

demand letter intimated that the deed of trust was filed by giving recordation information.

The foreclosure lawyer conducted a “foreclosure sale” and filed the substitute trustee’s

deed “conveying” the property back to the original purchaser. Subsequently, a title

company issued a title opinion stating that the “foreclosure” was null and void. The

original purchaser then filed a claim against the foreclosure lawyer who conducted the

“foreclosure” sale and sued the original lawyer who had prepared the warranty deed that

failed to disclose the prior encumbrance in the warranty deed.

Interestingly, the original lawyer who prepared the warranty deed that failed to

disclose the prior encumbrance was not found liable by the jury. The foreclosure lawyer,

however, was found by the jury to be negligent and the claim against the foreclosure

lawyer was upheld on appeal. The opinion of the Court of Appeals’ reflects that the court

was troubled by the foreclosure lawyer’s conduct. The court seemed unsure of whether

the foreclosure lawyer was just stupid in trying to foreclose an unrecorded deed of trust,

or whether the foreclosure lawyer was really deceptive in stating that there was a deed of

trust lien when in fact there was none. The lesson that comes from Boatwright is that a jury

in an unusual case may forgive a lawyer for making a drafting mistake, but it will not

forgive a lawyer for lying or appearing to lie.

I. Making false statements

12

This rule has been consistently followed in Texas. See Likover v. Sun Flower Terrace II, 696 S.W.2d 468, 472(Tex. App. – Houston [1st Dist.] 1985, no writ)(jury verdict that lawyer engaged in a conspiracy to defraudan opposing party affirmed where lawyer gave advice calculated to cause duress to opposing party);McKnight v. Riddle & Brown, 877 S.W.2d 59, 61 (Tex. App. – Tyler 1994)(summary judgment premised onattorney immunity for false information provided to opposing party reversed and remanded for trial); Kirbyv. Cruce, 688 S.W.2d 164, 165 (Tex. App.—Dallas, 1985, writ ref’d n.r.e.)(judgment rendered against attorneywho had knowledge that his and his client’s representations had a capacity to deceive the opposing party).


For a long time, it has been relatively clear that lawyers who lie to their clients will

have disciplinary problems and will have tort claims. For over one hundred years, the law

in Texas has been that an attorney is not immune from suit for his own fraudulent acts or

when he participates in his client’s fraud. Poole v. Houston & T.C.Ry, 58 Tex. 134,137 (Tex.

1882).12 The rationale supporting the rule that an attorney is liable for his fraudulent acts,

or participation in a fraud, is that an attorney who participates in fraudulent activities is

engaged in conduct that is “foreign to the duties of an attorney.” Likover v. Sun Flower

Terrace II, 696 S.W.2d 468, 472 (Tex. App. – Houston [1st. Dist.] 1985, no writ).

An evolving issue that has arisen recently is whether lawyers will be liable for

negligent misrepresentations to third parties. That is, will a lawyer be held liable to a third

party who is not his client, for telling a whopper. At least one jury verdict against a real

estate lawyer who told a whopper has now been affirmed on appeal. In First National Bank

of Durant v. Trans Terra Corporation, 142 F.3d 802 (5th Cir. 1998), a lawyer prepared several

opinion letters concerning some oil and gas properties for his client. Later, that same

lawyer was requested just prior to a closing on a loan to the lawyer’s client, to prepare a


title opinion addressed to the lender describing the state of title on the properties. (The

lender’s counsel prepared the loan documents including a collateral description for the

deed of trust based upon the prior opinion letters of the borrower’s counsel.) At the time

of closing, the title opinion that was to be prepared by the borrower’s attorney had not

been prepared. Therefore, the parties closed the transaction with funding conditioned on

the borrower’s lawyer providing the title opinion directed to the lender. The borrower’s

lawyer prepared the opinion without going to review the deed records to check the state

of title. Nevertheless, the title opinion stated that the lawyer had in fact examined the

deed records. After the transaction was completed, the borrower defaulted and the lender

foreclosed on the collateral. The lender, after foreclosure, discovered that the title opinion

was wrong, and that there was substantially less collateral than had been stated in the

opinion. The lawyer who prepared the erroneous title opinion was sued by the lender for

malpractice and for negligent misrepresentation. After trial, the jury determined that the

borrower’s lawyer had engaged in sufficient conduct so that he had established an

attorney-client relationship with the lender and held the lawyer liable for malpractice. The

jury also found that the borrower’s lawyer had negligently misrepresented the state of title

to the collateral, and that the lender was entitled to recover its damages under a negligent

misrepresentation theory.

The Fifth Circuit rejected the theory that the borrower’s lawyer had an

attorney-client relationship with the lender. The mere fact that the opinion was addressed

13

In F.E. Appling Interest, v. McCamish Martin Brown & Loefler, 953 S.W.2d 405 (Tex. Civ. App. [Texarkana]writ den'd April 14, 1998 but later granted) a borrower obtained a loan from a savings and loan which thenfailed to extend additional credit. The borrower brought a lender liability lawsuit against the savings andloan which case was settled. Fearing that the settlement might not be enforceable if the savings and loanwas taken over by the Federal Savings and Loan Insurance Corporation, the borrower agreed to sign thesettlement agreement only if the attorney for the savings and loan affirmed that the requirements of 12U.S.C. § 1823(e) had been met. The board of directors of the savings and loan approved the settlement andthe settlement was signed by the borrower. However, several weeks before the board approved thesettlement, the board had adopted a resolution placing the institution under voluntary supervision by thestate banking commissioner. The commissioner did not ratify the settlement, the institution failed, and thesettlement was unenforceable. The borrower then sued the savings and loan's attorney for negligentmisrepresentation and fraud. In reversing the trial court's summary judgment, the Court of Appealspointed out that Texas recognizes a cause of action for negligent misrepresentation as defined by theRESTATEMENT OF TORTS (SECOND) § 552 (1977). The Court of Appeals pointed out that a negligentmisrepresentation claim is not equivalent to a professional malpractice claim. Instead, Restatement(Second) of Torts provides:

One who, in the course of his business, profession or employment, or in any other transaction in whichhe has a pecuniary interest, supplied false information for the guidance of others in their businesstransactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance uponthe information, if he fails to exercise reasonable care or competence in obtaining or communicating theinformation.

Privity is not required in order for a negligent misrepresentation claim to exist. Appling at 408. The basisfor a negligent misrepresentation claim is the relationship of trust created when a attorney makesrepresentations to a third party in order to induce the third party's reliance. Id. at 408. To hold otherwiseconcluded the court would allow a lawyer to lie with impunity.


to the lender and stated that it was prepared for the benefit of the lender was not enough

to create an attorney-client relationship. Therefore, the Fifth Circuit refused to allow the

lender to assert a malpractice claim against the lawyer. Nevertheless, the Fifth Circuit

concluded, based on its reading of a Texas court of appeals decision styled F.E. Appling

Interests v. McCamish, Morten, Brown & Loefler, 953 S.W.2d 405 (Tex. Civ. App. 1997) that

negligent misrepresentation could be asserted against the borrower’s lawyer and that the

lender could recover from the borrower’s lawyer on that theory.13

14

Technically, the terms “inquiry” and “complaint” are related but different terms. An inquiry is any writtenmatter concerning attorney conduct received by the Office of the Chief Disciplinary Counsel that, even iftrue, does not allege Professional Misconduct or Disability. Tex. R. of Disc. Proc. Rule 1.06(N). A complaintmeans those written matters received by the Office of the Chief Disciplinary Counsel that, either on theirface or upon screening or preliminary investigation, allege professional misconduct or attorney disability


Interestingly, after the Fifth Circuit’s decision in First National Bank of Durant, F.E.

Appling Interests was argued before the Texas Supreme Court. We do not yet have a

decision from the Supreme Court on Appling Interests. If, in fact, the tort of negligent

misrepresentation may be asserted against lawyers, then real estate lawyers could have a

very significant exposure to this type of tort. For example, consider the number of real

estate transactions in which the borrower’s attorney is asked to opine that the loan

transaction is not usurious. Assuming that the transaction is later held to be usurious, will

the lender be able to assert a negligent misrepresentation claim against the borrower’s

attorney? Or, consider the number of real estate transactions in which one party’s counsel

is required to give a legal opinion as to the legality of the transaction. Given the present

state of the law, we will have to wait and see how the Supreme Court resolves Appling

Interests in order to assess the viability of a negligent misrepresentation theory against

Texas lawyers.

J. Assorted Disciplinary Issues

OVERVIEW

According to the data released by the State Bar for the period 1997-1998, the total

number of inquiries14 filed in Texas was down about 10% from the prior year. However,

or both, under the Texas Disciplinary Rules of Professional Conduct. Tex. R. of Disc. Proc. Rule 1.06(F).As used in this paper “grievance” and complaint mean the same.

15

In the year 1997-1998 there were 3,320 inquires that were classified as complaints and in 1996-1997 therewere 3,480 inquires that were classified as complaints.

16

Personal injury lawyers accumulated 778 complaints during the period, followed by family lawyers with775.


the number of inquiries that were classified as grievances or more accurately as

“complaints” remained about the same as in the two prior years.15 Thus, the number of

lawyers who last year were in a position in which they were required to respond to, and

appear before a grievance committee, remained about the same as for the last two years.

Numerically, lawyers involved in criminal law had the greatest number of complaints,

totaling approximately 1,100 in the period.16 The State Bar does not maintain records of the

total number of lawyers in Texas who practice in any particular area of practice.

Accordingly, it is not possible to determine whether the number of grievances filed against

criminal lawyers represents a higher frequency of grievances for criminal lawyers than for

17

Nor can we say, based on the way the State Bar maintains the data whether the criminal lawyers whoreceived these grievances were spending the vast majority of their time handling criminal law matters. Ifwe assume that criminal law practice is like most other areas of law practice, then we can reasonablyextrapolate that lawyers who handle such matters only occasionally, are more likely to attract grievancesthan those who devote all or a substantial portion of their practice to criminal law. Unfortunately, even thisassumption and the related extrapolation does not allow us to reach the conclusion that a lawyer whopractices criminal law will have a higher frequency of grievances than any other practice; let alone reach theinteresting question of: why are there numerically more grievances filed against lawyers engaged in criminallaw practice? Some pundits have said that the reason criminal defense lawyers have a high number ofgrievances is because if their clients lose, their clients have an abundance of time on their hands to file agrievance. And, some of these convicted clients perhaps hope that by taking pot shots at their lawyer theywill improve their position on an ineffective assistance of counsel argument. Perhaps this supposition iscorrect but – at this time we do not have the data in a form that allows us to reach this conclusion.


lawyers engaged in other areas of practice.17 The inability to correlate frequency with

specific areas of practice holds true for all areas of practice.

1. Competence, Diligence, & Clear Communication

It is somewhat surprising that competence, diligence and communication failures

still lead all other areas of conduct generating grievances. Consider this: If you were to

walk up to any of the approximately 70,000 lawyers in Texas and ask: 1) Are you hard

working? 2) Do you have some idea what you’re doing as a lawyer? Or 3) Are you

returning phone calls you get from you clients? I suspect you would get an unqualified

yes to each question. Yet, this is the aspect of practice that yields the largest number of

grievances. How do we explain the difference between the perception lawyers have, and

the grievance reality? I suspect it comes down to this – for the vast majority of lawyers

difficult clients give rise to a form of denial. (I’ll get to it tomorrow ... next week ... next

month.) In at least 95% of the matters these same lawyers work on they have none of these


problems. But, in 1-5% of their matters the client is difficult, uncommunicative or has

some other problem that makes it unpleasant for the lawyer to work on the matter. The

matter gets neglected, the phone calls don’t get returned, and the seeds for a grievance are

sown. But, if this hypothesis explains what is occurring, there is good news. The reason

is because many of these difficult problem clients can be culled out of your practice. But,

before we become too excited about eliminating difficult clients from our professional

lives, we should not forget that the termination/disengagement part of a lawyer’s practice

is another significant source of grievances. So cull out the difficult clients, but do it right,

and document it thoroughly. A few examples of sanctionable conduct in this area:

Competence: Texas Disciplinary Rule 1.01(a)(1) provides:

A lawyer shall not accept or continue employment in a legal matter which the lawyerknows or should know is beyond the lawyer’s competence, unless:

(1) another lawyer who is competent to handle the matter is, with the priorinformed consent of the client, associated in the matter.

A few examples of lawyers who were disciplined last year based on competenceproblems include the following lawyers:

! Lawyer failed to prepare and record a deed conveying real property to hisclient’s children. Failed to notify client of his suspension and continued topractice law. Result: disbarred. Vol. 61 Tx Bar J. 171.

! Lawyer failed to respond to numerous requests for information regarding atransactional application, failed to attend several scheduled meetings with herclient, or timely respond to notice of the complaint from the grievancecommittee. Result: 6 month suspension. Vol. 61 Tx Bar J. 963.


! Lawyer retained to represent complainant in a probate matter that lawyershould have known was beyond her competence, yet she failed to withdrawfrom the representation. Result: 3 month suspension fully probated. Vol. 61 TxBar J. 172.

A lack of diligence in representing a client also gave rise to disciplinary problems forTexas lawyers. Texas Disciplinary Rule 1.01(b)(1) provides:

In representing a client, a lawyer shall not:

(1) neglect a legal matter entrusted to the lawyer.

Neglect of a client matter was one of the most common disciplinary problems faced by

Texas lawyers. Consider the following examples:

! Lawyer neglected legal matters entrusted to him, failed to keep his clientsreasonably informed of the status of pending matters and failed to take stepsreasonably practicable to protect his clients’ interest upon termination ofemployment. Result: 66 month suspension partially probated. Vol. 60 TX barJ. 1176

! Personal injury lawyer allowed statute of limitations to expire. Result: 3 yearsuspension with third year probated. Vol. 61 Tx Bar J. 283.

! Lawyer filed a lawsuit after the statute of limitations had expired, and failed torespond to notice of the complaint or subpoenas from the grievance committee.Result: Disbarred. Vol. 61 Tx Bar J. 1072.

! Lawyer hired to oversee the management of complainant’s father’s estate andreplace the executor because of suspected mismanagement. Lawyer failed: toinvestigate the status of the estate property, to hire an accountant to review theestate’s financial condition, or to attempt to remove the executor. Result: Publicreprimand. Vol. 61 Tx Bar J. 965


Poor communications between some Texas attorneys and certain clients also

generated a substantial number of grievances. Texas Disciplinary Rule 1.03(a)

provides:

(a) A lawyer shall keep a client reasonably informed about the status of amatter and promptly comply with reasonable requests for information.

Set forth below are a few examples of lawyers who were disciplined for Rule

1.03 violations:

! Lawyer during a year period failed to respond to his client’s telephone callsconcerning the status of the case and failed to keep several office appointmentswith his client. Result: Public reprimand. Vol. 60 Tx Bar J. 1176.

! Lawyer settled the complainant’s case without the complainant’s knowledge orapproval, failed to keep the complainant informed of the status of the case andreceived settlement funds but failed to notify or deliver the funds to thecomplainant. Result: 5 year suspension fully probated. Vol. 61 TX Bar J. 282.

! Lawyer represented complainant on claim for lost money. Lawyer recoveredfunds for the complaint, but failed to notify the complaint of the existence of twochecks representing interest on the claim. Lawyer cashed the two checks andkept the funds for herself without fully obtaining the complainant’sauthorization. Result: 24 month suspension, fully probated. Vol 61 TX Bar J.171.

2. SAFEGUARDING PROPERTYConsider this: failure to safeguard the property of clients and others is the

second most sanctioned conduct for lawyers. Prudence would suggest that you use

extreme caution in handling property of clients and others. Document everything!

And, if there is any doubt call your ethics counsel.



(a) A lawyer shall hold funds and other property belonging in whole or inpart to clients or third persons that are in a lawyer’s possession in connection with arepresentation separate from the lawyer’s own property. Such funds shall be kept ina separate account, designated as a “trust” or “escrow” account, maintained in the statewhere the lawyer’s office is situated, or elsewhere with the consent of the client or thirdperson. Other client property shall be identified as such and appropriatelysafeguarded. Complete records of such account funds and other property shall be keptby the lawyer and shall be preserved for a period of five years after termination of therepresentation.

! Lawyer failed to hold funds of clients or third persons in a trust or escrowaccount. Result: 6 month suspension. Vol 61 TX Bar J. 282.

Rule 1.14(b) provides:

(b) Upon receiving funds or other property in which a client or third personhas an interest, a lawyer shall promptly notify the client or third person. Except asstated in this rule or otherwise permitted by law or by agreement with the client, alawyer shall promptly deliver to the client or third person any funds or other propertythat the client or third person is entitled to receive and, upon request by the client orthird person, shall promptly render a full accounting regarding such property.

! Lawyer received a settlement check on behalf of a client. Lawyer endorsed thecheck on behalf of an interested third party without the party’s knowledge orconsent. Lawyer deposited the proceeds into his IOLTA account but did notkeep segregated disputed proceeds until there was an accounting anddetermination of all parties’ interest or promptly remit to the third party hisagreed-upon interest in the proceeds. Result: 27 month suspension with 3months active suspension. 61 Vol. TX Bar J. 1072.

! Real estate lawyer handled closing and withheld funds from the closing tosatisfy outstanding taxes and a lien. Lawyer failed to timely pay the taxes orlien and converted funds held in trust for his own use. Result: 12 monthsuspension fully probated. 61 Vol. TX Bar J. 788.

3. UNAUTHORIZED PRACTICE


The area of unauthorized practice of law I believe is a substantial growth area

for grievances. There are two trends that I believe will drive this growth. First,

lawyers are far more mobile than their counterparts of even 10 years ago. This mobility

and willingness to go to foreign jurisdictions for clients may spawn a number of

grievances. The second trend is so gigantic that its size is astounding. Consider this

-- the number of lawyers who have failed to pay their dues, attorney taxes or to be

current on student loans, or on child support has reached significant proportions.

Assuming only a fraction of those lawyers are suspended and that a fraction of those

lawyers continue to practice while they are suspended, the number of grievances could

quadruple. Here are a few examples of lawyers caught in this part of the disciplinary

web.


A lawyer shall not:

(a) practice law in a jurisdiction where doing so violates the regulation of thelegal profession in that jurisdiction.

! Lawyer fails to pay student loans and attorney occupation tax. Lawyer fileslawsuit on behalf of a client in district court. He later failed to timely respondto notice of the complaint from the grievance committee or respond to thesubpoena. Result: Public Reprimand. 61 Vol. Tx Bar J. 1073.

! Lawyer files a motion to appear pro hac vice in a California court stating he wasan attorney licensed in Texas and was in good standing. Lawyer had previously

18

Of course the conduct in this case also had a serious problem of lack of truthfulness in violation of R. 4.01.


been suspended from the active rolls of the State Bar of Texas for non-paymentof dues. Result: Disbarred. 61 Vol. TX Bar J. 963.18

4. COMPOUNDING PROBLEMSIf there is a grievance issue that arises, there are certain things you can do that will

be equivalent to sticking your thumb in the State Bar’s eye. Such conduct is a good way to

assure a sanction and perhaps disbarment.

Lawful Demands for information: R. 8.01(b)

(b) fail to correct a misapprehension known by the person to have arisen inthe matter, or knowingly fail to respond to lawful demand for information from anadmission, reinstatement, or disciplinary authority, except that this rule does notrequire disclosure of information otherwise protected by Rule 1.05.

! Lawyer failed to respond to lawful demands for information from a disciplinaryauthority. Result: Public reprimand and $1,000 attorneys’ fees and court costs.

Honesty or fitness: R. 8.04(a)(2)

(a) A lawyer shall not:

(2) commit a serious crime or commit any other criminal act thatreflects adversely on the lawyer’s honesty, trustworthiness or fitness as a lawyerin other respects.

! Lawyer plead guilty to attempted forgery a class A misdemeanor. Result:Disbarred Vol. 60 Tx Bar J. 1175.

! A Company hired a person who was a lawyer as a regional manager. Lawyerviolated the company’s policy when he opened a checking account without thecompany’s knowledge or consent under the name of the Lawyer doing business


under the company’s name. Lawyer deposited more than $10,000 belonging tothe company into the checking account and used those funds for himself. Whenthe company became aware of the account, the lawyer resigned his job asregional manager of the company and replaced the funds he had used. Result:12 month suspension fully probated. 61 Vol. Tx Bar J. 714.

R. 8.04(a)(7)


(7) violate any disciplinary or disability order or judgment.

! Lawyer who had been suspended failed to remove or properly cover the words“attorney at law” following his name on a building sign. Result: 18 monthpartially probated suspension with the first 6 months actively served. 61 TX BarJ. 714.

! Lawyer repeatedly failed to attend PEP sessions and failed to prepare a writtenreport required by the PEP committee. Result: Public Reprimand. 61 Vol. TxBar J. 370.

R. 8.04 (a)(8)


(8) fail to timely furnish to the Chief Disciplinary Counsel’s office ora district grievance committee a response or other information as required bythe Texas Rules of Disciplinary Procedure, unless he or she in good faith timelyasserts a privilege or other legal ground for failure to do so.

! Lawyer failed to timely respond to notice of a complaint from the committee.Result: Public Reprimand. 62 Vol. TX Bar J.715.

R.8.04 (a)(10)


(10) fail to comply with section 13.01 of the Texas Rules of DisciplinaryProcedure relating to notification of an attorney’s cessation of practice.


! Lawyer fails to pay bar dues and meet his MCLE requirements and issuspended. While suspended he faxed a letter to four individuals indicating hewas a licensed attorney. Result: 24 month suspension six months activelyserved. 61 Vol. TX Bar J. 1072.


5. COMPOUNDING GRIEVANCE PROBLEMS TIMES TWO

The conduct described below is virtually guaranteed to yield disbarment:

! Lawyer pleaded guilty to 3 counts of making a false statement in an income taxreturn. 26 USC 7206. Result: Disbarred. 61 Vol. Tx Bar J. 787.

! Lawyer pleaded nolo contendere to one count of insurance fraud, moneylaundering and conspiracy to commit insurance fraud. Result: Disbarred. 61Vol. Tx Bar J. 787.

! Lawyer convicted for making false oaths and claims. 18 USC 152(2). Result:Disbarred. 61 Vol. Tx Bar J. 787.

! Lawyer convicted of bankruptcy fraud. Although the conviction has beenappealed he will be disbarred if the conviction becomes final. 61 Vol. TX Bar J.499.

! Lawyer plead nolo contendere to indecency with a child. If the lawyer’s 10 yearprobation is revoked he will be disbarred. 61 Vol. TX Bar J. 499.

! Lawyer plead nolo contendere to theft by check. After his probation wasviolated he was disbarred. 61 Vol. TX Bar J. 499.

ConclusionToday a real estate lawyer must be ever vigilant in guarding against malpractice

claims and grievances. Focusing your practice on specific areas of practice should help

some practitioners avoid claims that can arise out of failure to know the substantive

law applicable to a particular transaction. Careful supervision of associates and

non-lawyer staff, and allowing adequate time for projects remain important practices

for successful lawyers. At all times be diligent, and clearly communicate with your

clients. And, if a problem does arise -- tell the truth.

Documents

AVOIDING EVICTION FROM YOUR PRACTICE OR FORECLOSURE …