| Case Digest |
The clients were poor former farmers whose only asset was a farm valued at somewhere between $150,000 and $250,000, which was subject to several liens in an amount greater than the value of the farm. Most of the liens resulted from mortgages held by the Farm Service Administration (FSA), and there was a small mortgage in favor of a milling company. The clients knew they had to sell the farm, but they hoped to subdivide a 2-acre plot which would be sold to a sympathetic neighbor who would lease the plot back to them, so that they would still have a place to live. The clients were told that a bankruptcy lawyer might be able to clear out the liens to the point where this was possible, so they consulted the Respondent. The Respondent recommended that they file a Chapter 7 bankruptcy, and the clients retained him to do so. The Respondent filed and processed a Chapter 7 bankruptcy, including a petition for abandonment of the farm by the bankruptcy trustee. Two experienced bankruptcy attorneys testified that the Chapter 7 bankruptcy had no prospect of allowing the clients to remain on the land, and that Respondent should have filed a Chapter 11 bankruptcy, sought the voiding of the milling company mortgage as unsecured, and negotiated with FSA for settlement of its mortgages on terms which might make it possible for the right buyer to obtain clear title to all but the 2 acres, allowing the clients to sell the 2 acres to their neighbor and remain on the land. Immediately after the bankruptcy was closed, Respondent met with the clients and advised them that he would purchase the milling company mortgage and seek a buyer, which the clients understood to be “part of the procedure.” Over the next eighteen months the Respondent purchased the milling company mortgage for 10 cents on the dollar, filed a foreclosure action against the clients, and took the judgment to a sheriff’s sale where he purchased the farm. Days after the sheriff’s sale the Respondent met with the neighbor who was to buy the 2 acres and negotiated a revised purchase price, giving him the impression the plan was still in place. Respondent then agreed to sell the entire farm to a buyer, and filed an action in ejectment to evict the clients from the land. This was the first time the buyers realized Respondent was no longer representing their interests or pursuing their goal of remaining on the land. The Disciplinary Board found that the Respondent had, in various ways, led the clients and the neighbor to believe he was still committed to the plan to keep the clients on the land, even as he was taking steps to evict them from the land. The Disciplinary Board recommended that the Respondent be suspended for two years, with five members dissenting in favor of a five year suspension or disbarment. The Supreme Court entered an order suspending the Respondent for five years. |
