Cleveland Bar Assn. v. Greenberg

[Cite as Cleveland Bar Assn. v. Greenberg, 112 Ohio St.3d 138, 2006-Ohio-6519.]

CLEVELAND BAR ASSOCIATION v. GREENBERG.

[Cite as Cleveland Bar Assn. v. Greenberg, 112 Ohio St.3d 138, 2006-Ohio-

6519.]

Attorneys – Misconduct – Multiple disciplinary violations – 18-month suspension.

(No. 2006-1210 — Submitted September 20, 2006 — Decided

December 27, 2006.)

ON CERTIFIED REPORT by the Board of Commissioners on Grievances and

Discipline of the Supreme Court, No. 05-009.

__________________

Per Curiam.

{¶ 1} Respondent, Alan D. Greenberg of Pepper Pike, Ohio, Attorney

Registration No. 0011157, was admitted to the practice of law in Ohio in 1959.

Respondent has been registered in retired status under Gov.Bar R. VI(3) since

2003.

{¶ 2} On February 7, 2005, relator, Cleveland Bar Association, charged

respondent with three counts of professional misconduct. Respondent answered,

admitting most of the facts underlying the complaint but denying that he had

violated the Disciplinary Rules. A panel of the Board of Commissioners on

Grievances and Discipline heard the cause, making findings of misconduct and a

recommendation, which the board adopted.

Misconduct

{¶ 3} The three counts of misconduct arose from transactions involving

Blue E Investment Company (“Blue E”), a small commercial loan company that

respondent owns, controls, and represents. In 1998, as in previous and later years,

respondent conducted Blue E business and practiced law as a sole practitioner out

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of the same office, acting interchangeably as either Blue E’s legal counsel or its

corporate officer. Most of Blue E’s customers have been restaurants and bars.

Counts I and II

{¶ 4} Beginning in 1998, respondent represented the seller in the sale of

a tavern to Ray-Bons, Inc., a corporation then owned by Bonnie McCormick and

Ray Villanueva, her husband. The seller introduced respondent to McCormick

and Villanueva as the tavern’s attorney and someone who could “help them out.”

McCormick, a housewife of 30 years with no business experience, thereafter

relied on respondent’s advice in various business dealings with Blue E and others,

thinking that he was her lawyer.

{¶ 5} Some months after purchasing the tavern for $100,000, Ray-Bons

sought to borrow $15,000 from Blue E. To this end, on July 13, 1999,

McCormick and Villanueva signed a cognovit promissory note for $21,075 as

officers of Ray-Bons.1 The terms of the note required payments of $585 per

month for 35 months and a 36th additional payment of $600, stating an interest

rate of 13.5 percent per annum “after maturity or default.” McCormick and

Villanueva also agreed as corporate officers to give Blue E a security interest in

the tavern fixtures and liquor permit and to personally guarantee the loan.

Respondent prepared the note and the papers for the security interest and personal

guarantee. Apart from respondent’s legal “help” with these documents,

McCormick and Villanueva were not represented by counsel in these transactions.

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The holder of a cognovit in default obtains a “ ‘judgment without a trial of possible defenses

which the signers of the notes might assert’ ” because “the debtor consents in advance to the

holder’s obtaining a judgment without notice or hearing.” D.H. Overmyer Co., Inc. v. Frick Co.

(1972), 405 U.S. 174, 176-177, 92 S.Ct. 775, 31 L.Ed.2d 124, quoting Hadden v. Rumsey

Products, Inc. (C.A.2, 1952), 196 F.2d 92, 96. “An attorney, whom the note holder may

designate, appears on behalf of the debtor and, pursuant to provisions of the cognovit note,

confesses judgment and waives the debtor's right to notice of the proceedings. See Medina Supply

Co. v. Corrado (1996), 116 Ohio App.3d 847, 850 [689 N.E.2d 600]; Overmyer at 176 [92 S.Ct.

775, 31 L.Ed.2d 124].” Simmons Capital Advisors, Ltd. v. Kendall Group, Ltd., Franklin App. No.

05AP-1087, 2006-Ohio-2272, 2006 WL 1230673.

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January Term, 2006

{¶ 6} On August 16, 1999, Ray-Bons made a first payment of $586,

three days late, to Blue E on the promissory note. On September 1, 1999,

Villanueva personally borrowed $800 more from Blue E, although he did not sign

another note. Ray-Bons failed to make its September 1999 payment on the note,

and shortly afterward, the tavern closed.

{¶ 7} On October 4, 1999, about three months after the $15,000 loan,

respondent filed a complaint on behalf of Blue E to collect on the Ray-Bons

cognovit note. His complaint prayed for judgment in the amount of $21,289, plus

ten percent interest per annum beginning on October 4, 1999, against Ray-Bons,

McCormick, and Villanueva. The $21,289 prayer for relief represented the total

due on the note, i.e., $21,075 (without any rebate of unearned interest), plus the

$800 personal loan to Villanueva, less Ray-Bons’s single $586 payment on the

loan.

{¶ 8} At the disciplinary hearing, attorney George Argie, whom

McCormick eventually retained to represent her, claimed that respondent had

defrauded the court in obtaining judgment on the cognovit note. He testified that

respondent had overcharged for interest and had improperly included the $800

personal loan to Villanueva in his prayer for relief. In Argie’s view, respondent

had thereby misrepresented in his complaint the amount to which he was entitled

on default of the cognovit note.

{¶ 9} Respondent maintained that the cognovit note did not charge

excessive interest. The $6,075 amount, he claimed, was not “interest”; rather, it

was a premium charged for lending in connection with a high-risk venture. Thus,

respondent claimed, when Ray-Bons defaulted, the entire amount of the note, or

$21,075, became due, even though the three-year loan had been outstanding for

less than three months. And because the loan was business-to-business rather

than business-to-consumer, the parties were free to negotiate their own premium

according to their own judgment.

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{¶ 10} Respondent further asserted that the 13.5 percent interest rate

specified in the cognovit note applied only to the balance after taking judgment; it

did not apply in calculating interest during the actual life of the loan. According

to respondent, the terms of the loan were in fact fairly standard between corporate

parties of equal bargaining power transacting commercial business, especially

involving the high-risk purchase and operation of a bar.

{¶ 11} In adopting the panel’s report, the board accepted respondent’s

explanation of the Ray-Bons $15,000 loan. As to the unpaid $800 personal loan

to Villanueva that respondent had wrapped into the Ray-Bons judgment, however,

the board found that it was a consumer loan subject to the statutory restrictions on

those transactions. One such restriction is that the lending institution be licensed

by the state, which Blue E was not.

{¶ 12} After obtaining the judgment against Ray-Bons, McCormick, and

Villanueva, respondent took no further action to collect for over two years.

McCormick and Villanueva divorced in those years, and McCormick succeeded

to Villanueva’s interest in Ray-Bons. Respondent continued to act as Blue E’s

counsel and also gave legal advice to McCormick regarding her personal concerns

and Ray-Bons’s corporate interests, including acting as their representative before

the Ohio Liquor Commission. At no time did respondent suggest that

McCormick or Ray-Bons retain independent counsel.

{¶ 13} In November 1999, respondent learned that the tavern would lose

its liquor license unless Ray-Bons applied for authority from the state to

temporarily close the establishment. Respondent prepared the application for

Ray-Bons, had McCormick sign it, and filed the application with the state.

Respondent’s advice to McCormick was designed to protect Blue E’s security

interest in the liquor license, although he claimed that his advice was in both their

interests.

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January Term, 2006

{¶ 14} In early 2000, a buyer for Ray-Bons’s tavern came forward.

Respondent drafted papers for the prospective purchase, for which Blue E again

arranged financing. The buyer’s attorney drafted an interim management

agreement providing for loan payments of $683 per month. All parties signed the

management agreement. McCormick testified that when she signed, she was still

under the impression that respondent was her lawyer.

{¶ 15} Under the management agreement, the buyer agreed to direct its

payments to Blue E rather than Ray-Bons, and Blue E was to apply these

payments to reduce Ray-Bons’ debt to Blue E. The buyer eventually defaulted,

by which time Blue E had received $10,745. From this amount, Blue E applied

$4,951.50 to retiring the Ray-Bons judgment debt and retained $5,739.50 as

reimbursement for various payments made on behalf of Ray-Bons.

{¶ 16} On October 18, 2001, respondent appealed the denial of the

application to renew Ray-Bons’ liquor permit. Before the Ohio Liquor Control

Commission, respondent identified himself as Ray-Bons’ attorney. He did not tell

McCormick of the appeal.

{¶ 17} McCormick eventually retained Argie, who attempted to get relief

from the cognovit judgment pursuant to Civ.R. 60(B). Argie was not successful.

{¶ 18} At the disciplinary hearing, respondent denied any

misrepresentation or conflict of interest in his dealings with Ray-Bons,

McCormick, and Villanueva, insisting that his actions were necessary to protect

Blue E’s security interest in the tavern’s liquor license. The board, however,

found that by knowingly and improperly obtaining a judgment on the $800

personal loan, with interest, and by rolling it into a complaint for judgment on the

cognovit note, respondent had violated DR 1-102(A)(4) (prohibiting conduct

involving dishonesty, fraud, deceit, or misrepresentation), 1-102(A)(5)

(prohibiting conduct that is prejudicial to the administration of justice), and 1-

102(A)(6) (prohibiting conduct that adversely reflects on the lawyer’s fitness to

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practice law), as charged in Count I. As to Count II, the board found that

respondent had committed additional violations of DR 1-102(A)(4) by (1)

continuing to advise McCormick as to her legal interests and those of Ray-Bons

while at the same time acting to protect his own and Blue E’s financial interest in

Ray-Bons’ property and (2) misrepresenting himself as McCormick’s attorney to

a public agency in pursuit of his own and Blue E’s financial interest.

Count III

{¶ 19} In December 2001, while respondent’s motion to appoint a

receiver for Ray-Bons was pending, Al Molnar attempted to purchase Ray-Bons’

tavern in the name of his uncle. Molnar, a convicted felon, was legally barred

from holding a liquor permit in his own name. With his uncle’s power of attorney

and a check for $5,000, Molnar met with respondent about the prospective

purchase.

{¶ 20} Respondent’s role in this transaction also shifted between

representing himself and Molnar or his uncle. By 2001, Argie was representing

Ray-Bons as the seller, and he recalled Molnar’s saying that respondent was

representing him. In fact, Argie advised respondent in writing that Molnar

considered respondent his counsel. Respondent admitted that he and Molnar had

met in December 2001 and that he had drafted a purchase agreement and financial

documents naming Molnar’s uncle and Ray-Bons as parties to the sale of Ray-

Bons’ tavern. He denied, however, that he represented Molnar or his uncle in the

transaction.

{¶ 21} The purchase agreement, which was never fully executed, provided

for a total selling price of $40,000, with a $5,000 down payment to be paid

respondent and Argie in escrow. Molnar signed the purchase agreement for his

uncle and gave respondent a $5,000 check with the payee line left blank.

Respondent then filled in his and Argie’s names as payees and forwarded the

proposed purchase agreement and a copy of the check to Argie.

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January Term, 2006

{¶ 22} On January 3, 2002, fearful that the check might bounce,

respondent signed both his name and Argie’s on the check and deposited it into

his own office trust account. Respondent did not have Argie’s authority to sign

on his behalf or to negotiate Molnar’s check.

{¶ 23} In February 2002, respondent told Argie what he had done, and

Argie immediately advised respondent in writing that respondent had no authority

to endorse the check for him. Despite his denials that he had ever represented

Molnar or his uncle, respondent wrote a statement purporting to grant Argie

“authority” to speak to Molnar’s uncle directly, i.e., without respondent’s

involvement. Argie then redrafted the purchase agreement, obtained Molnar’s

and McCormick’s signatures, and forwarded it to respondent.

{¶ 24} This second purchase agreement designated Argie as the sole

escrow agent. As such, Argie demanded that respondent forward the $5,000

down payment to him. Respondent did not reply, nor did he respond to Argie’s

numerous subsequent demands for return of the $5,000.

{¶ 25} Respondent eventually agreed to return the $5,000 payment to

Argie after McCormick filed her grievance. Argie applied the money to his legal

fees with McCormick’s permission, although the money may have actually

belonged to Molnar because the Ray-Bons tavern purchase was never completed.

The bar and its liquor license were ultimately sold by a court-appointed receiver,

and over $13,000 of the proceeds of that sale was applied to satisfy respondent’s

judgment against Ray-Bons.

{¶ 26} Because respondent had endorsed Argie’s name without authority

and failed to remit the $5,000 check in accordance with the terms of the purchase

agreement, the board found that respondent had violated DR 1-102(A)(3)

(prohibiting illegal conduct involving moral turpitude) and 1-102(A)(6).

Recommended Sanction

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{¶ 27} In recommending a sanction for this misconduct, the board

weighed the aggravating and mitigating factors of respondent’s case. See Section

10 of the Rules and Regulations Governing Procedure on Complaints and

Hearings Before the Board of Commissioners on Grievances and Discipline

(“BCGD Proc.Reg.”).

{¶ 28} Favoring a severe sanction, the board found that all of respondent’s

misconduct resulted from his determination to profit from the Blue E loan to Ray-

Bons. The board thus concluded that respondent had acted out of self-interest, an

aggravating factor under BCGD Proc.Reg. 10(B)(2)(b). The board further found

that respondent had harmed a vulnerable victim by taking advantage of

McCormick’s lack of sophistication. BCGD Proc.Reg. 10(B)(1)(h). As an

example, the board cited the fact that respondent had not updated credit

information for Ray-Bons and McCormick to show repayment of at least $16,000

of the original $21,000 cognovit judgment, a lapse that has helped ruin

McCormick’s credit.

{¶ 29} The board also found in aggravation that respondent had engaged

in a pattern of misconduct and multiple offenses. BCGD Proc.Reg. 10(B)(1)(c)

and (d). In doing business with McCormick and Molnar, respondent created

conflicts of interest while loosely “representing” one or both of them, all the while

acting in Blue E’s and his own interest. In particular, respondent either led

McCormick to rely on his advice or did not advise her to seek independent

counsel when she clearly considered him to be her attorney. Molnar was also

under the impression that respondent represented him.

{¶ 30} In addition, the board determined that respondent’s testimony was

at times so inconsistent and contradictory that some of his statements must have

been false. The board thus found that respondent had submitted false evidence,

an aggravating factor under BCGD Proc.Reg. 10(B)(1)(f). Respondent also

refused to acknowledge his wrongdoing. BCGD Proc.Reg. 10(B)(1)(g). Even

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January Term, 2006

after purporting in writing to represent McCormick and Ray-Bons before the

Liquor Control Commission and admittedly exercising no duty of care or loyalty,

respondent still denied that he was ever their lawyer or that he had failed

McCormick and her company in any way.

{¶ 31} In mitigation, the board determined that respondent had no prior

disciplinary record. BCGD Proc.Reg. 10(B)(2)(a). Also, respondent generally

cooperated during the disciplinary proceedings. BCGD Proc.Reg. 10(B)(2)(d).

Finally, the board found that aside from the instant events, respondent enjoyed a

reputation for good character in the community.

{¶ 32} Relator suggested that respondent be indefinitely suspended from

the practice of law, with the suspension to commence at such time as respondent

requests reinstatement to the active practice of law, if he ever does. As an

alternative, relator proposed that respondent serve an 18-month suspension, again

with the suspension to commence when and if respondent resumes active practice.

Respondent advocated dismissal of the complaint or, in the alternative, a public

reprimand, citing the facts that he is retired and has closed his practice.

{¶ 33} Adopting the panel’s report, the board listed three instances in

which respondent acted with outright dishonesty. He falsely endorsed a check, he

misrepresented himself as the lawyer for the holder of a liquor license, and he

falsely took a judgment on Villanueva’s $800 personal loan. All prejudiced the

administration of justice and reflected poorly on respondent’s fitness to practice

law. These violations and an absence of significant mitigating circumstances, as

the board observed, have warranted a lawyer’s permanent disbarment.

Disciplinary Counsel v. Sagen (1991), 61 Ohio St.3d 62, 572 N.E.2d 658.

{¶ 34} In making its recommendation of a sanction, the board considered

the fact that respondent might choose to leave retirement and return to active

status at any time. It also considered the gravity of his misconduct and the need

to protect the public, balanced against his prior unblemished record and his

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reputation for good character. Taking all these factors into account, the board

recommended that respondent be suspended from the practice of law for 18

months. The board also recommended that the suspension commence on the date

that respondent resumes active status, if he ever seeks to do so.

Review

{¶ 35} We agree that respondent violated DR 1-102(A)(3), (4), (5), and

(6), as found by the board. We also agree that the recommended 18-month

suspension is appropriate.

{¶ 36} This case is similar to another instance in which a seasoned lawyer

insisted on advancing his own interests at the expense of clients and others, losing

sight of how his disloyalty breached professional duties. In his first disciplinary

proceeding, we suspended the lawyer’s license to practice for two years, staying

the last 18 months, for his unchecked conflicts of interest with clients, citing his

previously unblemished career. Akron Bar Assn. v. Holder, 102 Ohio St.3d 307,

2004-Ohio-2835, 810 N.E.2d 426. Later, we indefinitely suspended the same

lawyer’s license for further incidents of multiple representation, especially his

indifference to the attendant risks of compromising some clients’ interests while

protecting others. Akron Bar Assn. v. Holder, 105 Ohio St.3d 443, 2005-Ohio-

2695, 828 N.E.2d 621. That lawyer eventually also retired and later submitted his

resignation in hopes of avoiding disbarment in his third disciplinary case. We

rejected his offered resignation and ordered his disbarment. Akron Bar Assn. v.

Holder, 112 Ohio St.3d 90, 2006-Ohio-6506, 858 N.E.2d 356.

{¶ 37} Respondent does not object to the board’s findings of misconduct

or recommendation, and an intermediate suspension period — even though

respondent has retired — is in the public’s interest. Respondent is therefore

suspended from the practice of law in Ohio for a period of 18 months. The

suspension shall commence on the date that respondent applies to resume active

status, if that ever occurs. Costs are taxed to respondent.

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January Term, 2006

Judgment accordingly.

MOYER, C.J., RESNICK, PFEIFER, O’CONNOR, O’DONNELL and LANZINGER,

JJ., concur.

LUNDBERG STRATTON, J., concurs in part and dissents in part.

__________________

LUNDBERG STRATTON, J., concurring in part and dissenting in part.

{¶ 38} I concur in the opinion and judgment of the majority, except that I

would begin the 18-month suspension now rather than waiting for respondent to

apply to resume active status, if that ever occurs. I know of no precedent in this

court for a similar delay in imposing discipline.

{¶ 39} If the argument is that we should still enforce discipline despite

respondent’s retired status because he may apply to resume active status at any

time, then it makes more sense to enforce the discipline now. That gives

respondent an opportunity to reapply for active status at the expiration of the 18-

month suspension, since other than this incident, he has had no discipline and

otherwise has a good reputation in the community. The fact that respondent

chooses to be retired at this time seems irrelevant. Delaying discipline seems to

make the penalty even harsher.

{¶ 40} Accordingly, I respectfully dissent as to the delay in the imposition

of respondent’s suspension and would begin the 18-month suspension

immediately.

__________________

Cathleen M. Bolek and Todd J. Andersen, for relator.

Richard S. Koblentz and Bryan L. Penvose, for respondent.

______________________

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