STATEWIDE GRIEVANCE COMMITTEE

 

Patricia Welch, Complainant vs. John K. Harris, Jr., Respondent

 

Grievance Complaint #02-1220A

 

DECISION

 

Pursuant to Practice Book §2-35, the undersigned, duly-appointed reviewing committee of the Statewide Grievance Committee, conducted a hearing at the Superior Court, 80 Washington Street, Hartford, Connecticut on April 8, 2004.  The hearing addressed the record of the complaint filed on June 16, 2003, and the probable cause determination filed by the Windham Judicial District Grievance Panel on December 23, 2003, finding that there existed probable cause that the Respondent violated Rules 1.1, 1.3, 1.4, 1.7 and 1.15(b) of the Rules of Professional Conduct.

 

This matter originated in a complaint filed against a law firm (Grievance Complaint #02-1220).  During the course of the proceedings, it became apparent that the Respondent herein was responsible for the conduct at issue.  Accordingly, this file was opened, as set forth in the letter to the parties dated March 19, 2004.

 

Notice of the hearing was mailed to the Complainant and to the Respondent on March 1, 2004. The Complainant and the Respondent appeared and testified.  The Respondent was represented by Attorney William Gallitto.  Exhibits were admitted into evidence.

 

Reviewing committee member Attorney Vincent DeAngelo was not available for the hearing.  Since both the Complainant and the Respondent waived Attorney DeAngelo’s participation, this decision was rendered by the undersigned.

 

This reviewing committee finds the following facts by clear and convincing evidence:

 

The Complainant is the owner of a corporation, the Mill on the Quinebaug River, Inc., which owned commercial property of the same name.  The Complainant’s husband was the president of the corporation.  For a number of years the Respondent had represented the Complainant’s husband in various matters.  The Respondent believed that the Complainant’s husband, rather than the Complainant, was the owner of the corporation, based on prior sworn statements by the Complainant’s husband.   Due to financial difficulties, it was decided that the corporation should sell the property.  The Complainant’s husband located a potential buyer, Greg A. Renshaw.  In June of 2002, the terms of the sale were finalized, although no purchase and sale agreement was signed.  Mr. Renshaw had difficulty obtaining financing.  It was suggested that the money be loaned to Mr. Renshaw by the Starlag Family Trust, an investment vehicle of which the Respondent was trustee.  The Respondent discussed such a loan with the owners of the Trust.  Although the Trust already had two non-performing loans to the corporation, the Respondent believed that the Trust would fund Mr. Renshaw’s mortgage.  However, no loan agreement or other writing was obtained. 

 

Although the funding was not yet obtained, the Complainant’s husband and Mr. Renshaw wished to proceed with the sale.  The closing was held on June 28, 2002, with the Respondent representing the corporation.  After accounting for the deposit, the down payment and various credits, the corporation was to receive $140,052.96 from the transaction.  The Respondent explained to the Complainant’s husband that the money was not available at the closing, but that he expected the money to be forthcoming shortly.  However, soon after the closing, the owners of the Trust told the Respondent that they would not invest any more money in the property until the property was insured.  Due to insufficient occupancy, neither Mr. Renshaw nor the Respondent was able to arrange insurance for the property.  Accordingly, the funding was not obtained.  Subsequently, the corporation was reimbursed for the missing funds, with interest.  The money came primarily from the Respondent’s personal account, along with payments from Mr. Renshaw pursuant to the mortgage that was signed at the closing.  The bulk of the funds were reimbursed in December of 2003.

 

This reviewing committee concludes by clear and convincing evidence that the Respondent violated the Rules of Professional Conduct.  In allowing the sale of his client’s property without obtaining either the total amount of funds due or security for them, the Respondent clearly failed to provide competent representation, in violation of Rule 1.1 of the Rules of Professional Conduct. The subsequent delay in obtaining the funds, with the bulk of the funds not being provided until approximately one and half years later, constituted a lack of reasonable diligence in violation of Rule 1.3 of the Rules of Professional Conduct.  Although the Respondent may have acted reasonably in believing the Complainant’s husband was the owner of the corporation, the lack of traditional documentation, such as a purchase and sale agreement and financing documents, reflect that the Respondent failed to adequately communicate to his client the risks involved in this highly unusual transaction, in violation of Rule 1.4 of the Rules of Professional Conduct.  The record does not support a finding by clear and convincing evidence of violations of the other Rules of Professional Conduct cited in the probable cause finding.  Safeguarding property does not appear to have been an issue since no funds were loaned, and there does not appear to have been a direct conflict, although it certainly would have been wiser for the Respondent to have divested himself from his role as trustee during the transaction.

 

It is difficult for this reviewing committee to conceive of how to conduct a real estate transaction in a more ineffective and inappropriate manner than was done in this case.  Ordinarily, this reviewing committee would consider ordering a presentment under these circumstances, but the reviewing committee takes note that the Respondent has fully reimbursed the client for the unfunded portion of the transaction.  Accordingly, the reviewing committee reprimands the Respondent, and further orders that he take and complete a continuing legal education course in legal ethics, of a minimum of three (3) credit hours, within one (1) year of the date of this order. The Respondent is to provide proof of same to the Statewide Grievance Committee within thirty (30) days of completing the CLE course.

 

 

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Attorney John Matulis

 

___________________________________

Ms. Johanna Kimball