Friday, April 15, 2011

A Reasonable Belief, A Conflict Of Interest

An Illinois Hearing Board found a conflict of interest where an attorney had represented the buyer and seller in a real estate transaction, rejecting the attorney's contrary contentions:

We conclude the sellers were Respondent’s clients because they reasonably believed Respondent was their attorney, Respondent performed functions supporting that belief and there was no evidence Respondent took any actions to disavow that he was the sellers’ attorney. A client’s reasonable belief that an attorney is acting on their behalf is a significant factor in determining whether an attorney-client relationship exists. See In re Imming, 131 Ill. 2d 239, 253-54, 545 N.E.2d 715 (1989); In re Demuth, 126 Ill. 2d 1, 9, 533 N.E.2d 867 (1988). "An attorney-client relationship need not be explicit or expressed and is not dependent on the amount of time the client spends with the attorney, the payment of fees or execution of a contract, the consent of the attorney, or the actual employment of the attorney. Rather, the relationship can come into being during the initial contact between the layperson and the professional and appears to hinge on the client’s belief that he is consulting a lawyer in that capacity and his manifested intention to seek professional legal advice." Herbes v. Graham, 180 Ill. App. 3d 692, 536 N.E.2d 164 (1989).

Both sellers testified that they believed Respondent was their attorney and based on the evidence presented, we find their belief was reasonable. Respondent admitted that he prepared the closing documents, drafted the letter of direction instructing the title company how to distribute the sellers’ proceeds and was paid out of the sellers’ proceeds for his attorney’s fees. Both Mr. Moshin and Ms. Patel testified that Respondent was introduced to them as their attorney and that Respondent explained the closing documents to them and told them where to sign the documents. Additionally, Mr. Lopez testified that Respondent told him he was going to act as the attorney for both Mr. Lopez and the sellers to expedite the closing because the sellers did not have an attorney.

Respondent denied that he was introduced to Mr. Moshin and Ms. Patel as their attorney or that he explained the closing documents to Mr. Moshin and Ms. Patel and told them where to sign the documents. However, we find Mr. Lopez, Mr. Moshin and Ms. Patel, and not Respondent, credible. In re Smith, 168 Ill. 2d 269, 283, 659 N.E.2d 896 (1995) (the Hearing Board is in the best position to determine the credibility of a witness). The witnesses had no reason to lie and nothing to gain by testifying untruthfully. Some of Respondent’s testimony concerning his relationship with Mr. Pareja was successfully impeached and his credibility was damaged by his testimony regarding the letter of direction he wrote. Respondent testified that he drafted the letter of direction at the very end of the closing, but Respondent obviously wrote part of the letter after the first HUD-1 was drafted, because it reflects the sellers’ proceeds on the first HUD-1. Respondent also attempted to avoid answering some questions and held back information.

The hearing board recommends a three-month suspension. (Mike Frisch)

http://lawprofessors.typepad.com/legal_profession/2011/04/an-illinois-hearing-board-found-a-conflict-of-interest-where-an-attorney-had-represented-the-buyer-and-seller-in-a-real-estat.html

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