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Iowa Supreme Court Attorney Disciplinary Board Complainant v. Lynch

Supreme Court of Iowa

September 15, 2017

IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD, Complainant,
v.
LAWRENCE L. LYNCH, Respondent.

         On review of the report of the Iowa Supreme Court Grievance Commission.

         The grievance commission recommends the suspension of an attorney's license for violations of ethical rules. LICENSE SUSPENDED.

          Tara M. van Brederode and Susan A. Wendel, Des Moines, for complainant.

          Leon F. Spies of Spies, Pavelich & Foley, Iowa City, for respondent.

          MANSFIELD, JUSTICE.

         In an effort to salvage his troubled real estate investments, an attorney borrowed money from certain longtime clients. The attorney failed to advise the clients to obtain independent counsel, failed to obtain their written informed consent, and continued to represent those clients after borrowing the money. The attorney also did not disclose his perilous financial situation. The loans eventually totaled $177, 000 in principal amount, none of which has been repaid. The attorney later self-reported his conduct to the Iowa Supreme Court Attorney Disciplinary Board (the Board). The Board charged the attorney with violating Iowa Rules of Professional Conduct 32:1.7(a), 32:1.7(b), and 32:1.8(a).

         The parties reached a stipulation concerning the facts and the rule violations but went to a hearing regarding the appropriate sanction. After this hearing, the Iowa Supreme Court Grievance Commission (the commission) recommended suspending the attorney's license for nine months. On our review, we agree that the violations occurred and suspend the attorney's license to practice law for six months.

         I. Background Facts and Proceedings.

         Lawrence Lynch was first admitted to the Iowa bar in 1971 and has practiced law in Iowa City his entire professional career. Lynch maintains a small general-practice firm where he is the named partner. Lynch has also invested in real estate and previously owned several rental properties in Iowa City.

         In the early 1980s, Lynch began performing legal services on an ongoing basis for Darrel Bell, a farmer in Lone Tree, and Darrel's wife, Carolyn. Lynch represented Darrel and Carolyn in a variety of business and personal matters. Around the same time, Lynch also began acting as legal counsel for Darrel's son and daughter-in-law, Tom and Terri Bell. Over the years, Lynch formed a close friendship with the Bell family in addition to a good working relationship. Until 2014, Lynch regularly provided paid legal services to Darrel, Carolyn, Tom, and Terri.

         In October 2008, Lynch was experiencing personal financial difficulties related to his real estate ventures. He telephoned Darrel and Carolyn, who were then on vacation in Florida, and asked to borrow $90, 000 from them. Lynch told Darrel and Carolyn he needed the money the next day. Darrel and Carolyn agreed to lend Lynch the money and took out a corresponding short-term loan from their own bank. Because Darrel and Carolyn were in Florida at the time, they overnighted the check to Lynch the following day. Lynch executed a promissory note for the $90, 000, payable June 1, 2009, with a 7.5% interest rate. The following month, Lynch prepared and signed a mortgage giving Darrel and Carolyn a security interest in one of the rental properties Lynch owned. Lynch did not tell Darrel and Carolyn they should retain independent counsel in connection with the transaction, nor did he ask for or receive their informed consent in writing.

         In March 2010, Lynch contacted Tom and asked to meet him personally in Coralville. At that meeting, Lynch sought a personal loan from Tom and Terri "to put a roof on one of his buildings." Tom wrote a check for $17, 000 that same day. Lynch signed a promissory note to repay the loan, with 8% interest, by August 10. Lynch did not provide any security for the note. Lynch did not tell Tom and Terri they should retain independent counsel in connection with the transaction, nor did he ask for or receive their informed consent in writing.

         Later that month, Lynch wrote to Darrel and Carolyn stating that he could not repay their $90, 000 promissory note. Lynch explained that he was "in the process of rebuilding two buildings . . . and because [he] had to evict most of the tenants, it [had] left [him] a little bit shorter than what [he] had anticipated." Lynch therefore included with his letter a written extension to October of the past-due note. He asked Darrel and Carolyn to sign and drop off the extension. Lynch also enclosed a check for $3140.50, which amounted to about a third of the accrued and unpaid interest. Additionally, Lynch prepared and signed a second promissory note to Darrel and Carolyn for $6000, representing the balance of the overdue and unpaid interest.

         Darrel and Carolyn signed off on the requested extension. As before, Lynch did not tell them they should retain independent counsel, nor did he ask for or obtain their written informed consent.

         As October approached, Lynch again lacked sufficient funds to repay Darrel and Carolyn. He sought another extension and, as before, Darrel and Carolyn agreed. Lynch neither advised Darrel and Carolyn to get independent counsel nor obtained their informed consent.

         In February 2012, Lynch asked Darrel and Carolyn to lend him an additional $70, 000. In this transaction, Lynch executed a promissory note for $161, 000 at 7.5% interest, which covered the $70, 000 in new funds while also replacing the previous notes to Darrel and Carolyn for $90, 000 and $6000.[1] This note was originally payable in full by October 2013, but repayment was later extended to April 2014. As previously, Lynch did not advise Darrel and Carolyn on the need for independent counsel or obtain their informed consent.

         In 2013, Darrel, Carolyn, Tom, and Terri took a foreign trip together. During the trip, each of the two couples learned for the first time that Lynch had borrowed money from the other couple.

         On January 30, 2014, Darrel died. Lynch filed a petition in probate as attorney for Carolyn, the executor of Darrel's estate. Shortly after this filing, Lynch requested another extension from Carolyn on the outstanding note payable to Darrel and her.

         During that timeframe, Lynch attempted to sell many of his properties, including the rental property on which Darrel and Carolyn held a mortgage. Lynch approached Carolyn and asked her to sign a release of that mortgage. Carolyn initially declined, and Lynch then sent her a letter explaining that the mortgage was actually a second mortgage. After payment of closing costs and fees (including $130, 000 in delinquent taxes), Lynch's letter explained that the property sale would not generate enough even to satisfy the first mortgage. Accordingly, Lynch proposed that in exchange for the release, he would grant Carolyn a second mortgage on another property.[2] Lynch's letter continued,

I have no more money to pay other debts that [are] still associated with this property, but all of the other creditors have agreed to work with me. This puts me in a much stronger position to be able to make my payments to you monthly. If I do not receive your release back in my hands to present to the other people, the sale will be lost and the property simply reverts back to the individuals who bought the back taxes and I will have no equity to pay anyone.

         On the advice of her children, Carolyn decided to consult with another attorney to review the release.

         Lynch also obtained counsel. Soon thereafter, he wrote a letter to the Board reporting "what [he] now believe[d] to be" several violations of the Iowa Rules of Professional ...


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