holding that while respondent attorney violated former *69 Code of Professional Responsibility Disciplinary Rule 5-104 (1972) in entering a business transaction with a client without necessary safeguards, professional discipline was not warranted due to the “relatively undefined” nature of the attorney-client relationship at issue, the attorney’s good faith, and the lack of harm to the client
How later courts described this case
- holding that while respondent attorney violated former *69 Code of Professional Responsibility Disciplinary Rule 5-104 (1972) in entering a business transaction with a client without necessary safeguards, professional discipline was not warranted due to the “relatively undefined” nature of the attorney-client relationship at issue, the attorney’s good faith, and the lack of harm to the client
- holding that while respondent attorney violated former Code of Professional Responsibility Disciplinary Rule 5-l 04 ( 1972) in entering a business transaction with a client without necessary safeguards, professional discipline was not warranted due to the "relatively undefined" nature of the attorney-client relationship at issue, the attorney's good faith, and the lack of harm to the client
- holding that while respondent attorney violated former Code of Professional Responsibility Disciplinary Rule 5-104 (1972
- imposing no sanction where attorney’s conduct was “borderline,” but explaining that the court would not be so lenient in the future
Written by the judges who cited it.
The opinion
Dore, J.
(dissenting) — Martha Cole died, leaving her entire estate to her daughter, Eileen Ward, whom she nominated as executrix of her will. Attorney McGlothlen solicited the probate from Eileen Ward and, because she was an out-of-state resident, substituted Delford Woodall as executor of the Martha Cole estate. This was unnecessary, as he could have simply qualified Eileen Ward as a nonresident executrix and appointed himself or Woodall as her statutory agent to represent the estate. This could have been accomplished under RCW 11.36 ("Qualifications of Personal Representatives") which provides in part, in section .010, as follows:
A nonresident may be appointed to act as personal rep *528 resentative if he shall appoint an agent, who is a resident of the county where such estate is being probated, or, who is an attorney of record of the estate, upon whom service of all papers may be made;. . .
Had McGlothlen appointed Ward as out-of-state executrix and himself or Woodall as statutory agent, everyone would admit that an attorney-client relationship continuously existed between McGlothlen and Ward. But by securing the appointment of Woodall instead of Ward as executor, he contended that no attorney-client relationship existed between himself and Ward, and that in buying the estate property, an arms-length relationship existed between buyer and seller and he owed no duty whatsoever to Ward to make a full disclosure. In summary, McGlothlen claims he was attorney for Woodall and the estate but not Ward. However, in spite of Woodall's appointment, there is substantial evidence in the record that the attorney-client relationship between McGlothlen and Ward continued throughout this entire transaction. The initial letter written by McGlothlen to Ward dated July 22, 1975 (exhibit 4), in which McGlothlen explains the circumstances of his having the estate file, stated, "If you have any immediate legal questions do not hesitate to call me for an appointment". Ward's immediate response dated July 25, 1975 (exhibit 9) states, "I sincerely hope you will take care of this matter for me". (Italics mine.)
A letter dated September 19, 1975, to Ward from McGlothlen (exhibit 5) gives more substance to the attorney-client relationship between them. In it, McGlothlen explains that the proceeds from the rental of the house would be forwarded to Ward after he deducts the cost of administration of the estate.
Further evidence can be found by the fact that McGloth-len handled the transfer of the property himself. In his letter offering to purchase the house (exhibit 3), McGlothlen states:
By accepting my Offer of Purchase, you have no real estate broker fees to pay, which are estimated at 7 % nor *529 do you have any other attorney fees for this sale. This, of course is a savings to you.
(Italics mine.)
Most illuminating on this issue, however, is McGlothlen's own admission, in a letter to the bar association dated May 8, 1981 (exhibit 2), in which he states:
Mrs. Ward was the sole heir of the estate. In 1975 she advised that Mr. Woodall had not advised her as to what was occurring with regard to her mother's estate and she retained me to complete the probate of both estates.
(Italics mine.)
CPR DR 5-104 is applicable to the subject case. CPR DR 5-104(A) states:
A lawyer shall not enter into a business transaction with a client if they have differing interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure.
The great importance of the duty of an attorney to a client in a business transaction is discussed in the case of In re Beakley, 6 Wn.2d 410, 423-24 , 107 P.2d 1097 (1940). That case involved several charges for which the attorney was disbarred. One charge involved the attorney's business transactions with a client. This court addressed that issue at length. Terming the attorney-client relationship "one of the strongest fiduciary relationships known to the law", the court then quotes 7 C.J.S. Attorney and Client § 127.
"The relation of attorney and client has always been regarded as one of special trust and confidence. The law therefore requires that all dealings between an attorney and his client shall be characterized by the utmost fairness and good faith, and it scrutinizes with great closeness all transactions had between them. So strict is the rule on this subject that dealings between an attorney and his client are held, as against the attorney, to be prima facie fraudulent, and to sustain a transaction of advantage to himself with his client the attorney has the burden of showing not only that he used no undue influence but that he gave his client all the information and advice which it would have been his duty to give if he *530 himself had not been interested, and that the transaction was as beneficial to the client as it would have been had the client dealt with a stranger."
(Italics mine.)
McGlothlen had no right to rely on a year-old Yakima County Assessor's appraisal of the property, but had a duty to retain an independent appraiser to secure an updated market value of the purchased home, or at least to consult a local realtor as to the present market value of the home. He then should have conveyed all of such information to the seller, Ward, so she could intelligently know whether McGlothlen was offering her a fair price for her home. One reading McGlothlen's letter to Ward could infer that the property had been appraised at $9,000 the previous year, yet not know that assessors' appraisals traditionally are below market value. 3 This is best illustrated by the fact that the home sold to McGlothlen for $8,500 was sold, as is, a year later for $14,500. Perhaps if McGlothlen had made a complete disclosure to Ward she could have sold her home for $14,500, rather than for $8,500 to her attorney.
The majority states at page 525, "McGlothlen's conduct as measured against ordinary standards was entirely proper . . Based on the subject record, this is an incredible statement. McGlothlen was not fair; he failed to disclose full information to his client as to the market value of the home, and personally profited handsomely as a result of his deception and breach of his professional responsibility. This is not proper measured against any standards.
Conclusion
The Board of Governors found that an attorney-client relationship existed at all times between McGlothlen and Ward during the subject real estate transaction; that *531 McGlothlen violated the Code of Professional Responsibility for attorneys (CPR DR 5-104(A)) by failing to make a complete disclosure as mandated; and recommended a censure. I agree, except as to the sanction.
Rather than a censure, I would suspend McGlothlen from the practice of law for at least 90 days, which would reflect the seriousness of his violation of his obligation to his client.
Real estate tax ratios in Yakima County in 1979 were 76.1 percent. In 1979, an average home in Yakima with a market value of $12,000 would be assessed at a ratio of 76.1 percent, being a market value of $9,120. Department of Revenue and Office of State Auditor publication, July 1981, "Property Tax Ratios by County, Table 20," 1980 Property Tax Collections and Levies Due in 1981.