Iowa Supreme Court Attorney Disciplinary Board v. Richard J. Murphy ( 2011 )

IN THE SUPREME COURT OF IOWA
No. 09–1745
Filed May 27, 2011
IOWA SUPREME COURT ATTORNEY DISCIPLINARY BOARD,
Appellee,
vs.
RICHARD J. MURPHY,
Appellant.
On appeal from the report of the Grievance Commission of the
Supreme Court of Iowa.
Appeal from Grievance Commission report in disciplinary
proceeding recommending that attorney be publicly reprimanded.
LICENSE SUSPENDED.
David L. Brown and Jay D. Grimes of Hansen, McClintock & Riley,
Des Moines, for appellant.
Charles L. Harrington and Elizabeth E. Quinlan, Des Moines, for
appellee.
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CADY, Chief Justice.
This appeal comes from a report of a division of the Grievance
Commission of the Supreme Court of Iowa. See Iowa Ct. R. 35.10. The
Iowa Supreme Court Attorney Disciplinary Board alleged Richard J.
Murphy violated ethical rules when representing his wife in her capacity
as conservator and guardian and in representing the seller and buyer in
the sale of the ward’s home.
The grievance commission found Murphy violated the Iowa Code of
Professional Responsibility for Lawyers and recommended he be publicly
reprimanded. Upon our review, we find Murphy committed several
serious ethical violations and suspend him from the practice of law for a
period of eighteen months.
I. Background Facts and Proceedings.
Richard J. Murphy was admitted to practice law in Iowa in 1964.
He moved to Osceola with his wife, Patricia, and began his practice.
Murphy and Patricia raised three children, including Thomas Murphy,
who now practices law with Murphy. Murphy primarily practices in the
areas of real estate, probate, and tax. On occasions, Patricia worked as a
secretary in Murphy’s law office. During his forty-five-year career,
Murphy has been active in civic groups such as Rotary Club and the
Jaycees. He has never been disciplined.
Murphy served as the Clarke County Attorney at the beginning of
his career. While serving in this capacity, Murphy became acquainted
with Helen Doss, who was the Clarke County Auditor. Murphy
eventually became Doss’s personal attorney and periodically performed
various legal services for her. Murphy’s family, including Patricia,
became personal friends with Doss. Doss was widowed with no children,
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and it became well known in the community that Doss, over time, relied
on Patricia to assist her with her needs.
At some point, Doss also began to include Patricia and Murphy in
her financial planning. In 1992, she named Murphy as the beneficiary of
her life insurance policy. She also named Patricia as a co-owner of an
account she maintained at Great Western Bank. Murphy assisted in the
transaction by driving Doss to the bank where she signed documents to
establish the joint ownership. Doss also named Murphy as a joint owner
of a certificate of deposit she maintained at Union Planters Bank.
In late July 2000, Murphy prepared and filed a voluntary petition
for appointment of a guardian and conservator for Doss. Doss was
ninety-two years old at the time and had fallen several times in her
home. Consequently, Doss agreed to move from her home into an
extended care unit at the county hospital. After Doss moved into the
care unit, she began to exhibit signs of dementia. Doss acknowledged in
the petition for appointment of guardian and conservatorship that she
was “unable to care for [her] personal safety or to . . . provide for [her]
necessities . . . and [was] unable to make, communicate, or carry out
important decisions concerning [her] financial affairs.”
The district court entered an order appointing Patricia as the
guardian and conservator of Doss. Murphy was designated as the
attorney for Patricia.
After the conservatorship and guardianship was opened, Doss
continued to include the Murphys in her estate planning. This was
generally done by continuing to make Patricia a joint owner of her
financial accounts and by making gifts to Patricia and Murphy.
In February 2001, Doss directed Brenton Bank by written
correspondence to remove the name of a relative as co-owner of two
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certificates of deposit maintained at the bank and to substitute Patricia
as co-owner. Murphy had a telephone conversation with a person at the
bank the day before Doss signed the letter requesting the change.
Two days later, Doss signed a letter addressed to Patricia directing
her to sell the E-bonds she owned and to reinvest the proceeds in
interest-bearing accounts payable to Patricia upon her death. As before,
this letter was prepared for Doss to sign. Murphy then referred Patricia
to a representative of A.G. Edwards & Sons, Inc. The E-bonds were
redeemed for $125,840.71 and the proceeds were placed in an A.G.
Edwards joint account with Patricia a short time later. Patricia paid the
taxes on the transactions with the funds from another bank account held
by Doss.
During this same time period, Murphy prepared a testamentary
will for Doss. It was signed by her on March 5, 2001, and designated
Patricia as the executor. This will left the bulk of her property to her
nieces and nephews. Murphy had prepared a living will for Doss in 1988
and a testamentary will for Doss in 1991. In August 2000, just after
Doss was admitted to the extended care unit, Murphy prepared a codicil
to the 1991 will, substituting Patricia as the executor under the will.
Doss also maintained two bank accounts with Clarke County State
Bank. Once the conservatorship and guardianship was established,
Murphy only considered one of the two accounts at Clarke County State
Bank to be an account of the conservatorship, and he only disclosed the
activities of that account in the annual conservatorship report. Murphy
considered the second account to be the personal account of Doss and
did not disclose the account activities in the annual conservatorship
report. Doss and Patricia wrote checks drawn on the undisclosed
account for a variety of reasons, including cash gifts to Patricia, Murphy,
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Care Center employees, and Doss. On one occasion, the account funds
were used to purchase a vacuum cleaner for the Murphys at a cost of
$1427.96. Checks from the account were often made payable to Murphy
and Patricia in increments of $500 or $1000.
Murphy filed annual conservatorship reports with the court during
the period of the conservatorship proceedings, but failed to disclose any
of the transactions involving the transfer of property to Patricia or
himself. In addition to failing to disclose the account activities in one of
the two accounts with Clarke County State Bank, Murphy failed to
disclose the joint ownership of the A.G. Edwards account. He reported
the sale of the E-bonds, but did not disclose that his wife became a co-
owner of the proceeds. Similarly, Murphy did not reveal Patricia as the
substitute co-owner of the CDs at Brenton Bank. Likewise, Murphy
failed to disclose in the annual reports filed with the court that Patricia
was a joint owner on the accounts maintained with Great Western Bank
and Union Planters Bank. He never sought court approval before
transferring property or making gifts.
In 2002, Doss sold her residence. Murphy’s son and law partner,
Thomas, provided legal services to the buyer of the home by examining
the abstract and preparing a title opinion of the buyer. Murphy provided
the legal services and advice to Patricia in the real estate transaction.
On appeal, Murphy asserts he was unaware his son provided legal
services to the buyer.
Doss died on September 18, 2004. She was ninety-six years old at
the time. Her last will and testament was the will signed on March 5,
2001. It made a single specific bequest to St. Jude’s Hospital for
$10,000 and left the remainder of the estate to her nieces and nephews
in equal shares. Murphy filed a petition to probate the will. The court
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appointed Patricia executor, and Murphy was designated as the attorney
for the executor. There were five nieces and nephews who would share
in the estate, including Harley D. Reed.
Murphy made a claim for benefits under the life insurance policy
in October 2004. He was surprised to learn he had been designated as a
beneficiary.
In November 2004, Murphy sent the beneficiaries a copy of the
will, but failed to include the second page showing Patricia had been
designated as the executor. In March 2005, Murphy filed the required
report and inventory of the estate with the district court. The total value
of the estate was $667,783.36. The schedule of joint tenancy property
listed Patricia as a joint tenant of numerous accounts totaling
approximately $240,000. Murphy was listed as a joint tenant of the
Union Trust Bank account valued at approximately $36,000. The report
and inventory failed to identify the life insurance policy naming Murphy
as the beneficiary.
Reed subsequently contacted Murphy about the estate and the
probate proceedings. He requested a copy of the report and inventory
from Murphy. Murphy eventually responded by providing him a copy of
the report and inventory, but failed to include the schedules of the report
identifying the amount of the gross estate and property held in joint
tenancy. Reed eventually learned of the gross value of the estate from
the clerk of court.
Once Reed discovered the extent of the property that was subject
to co-ownership by the Murphys, the residual beneficiaries contacted an
attorney to investigate the matter. Following lengthy negotiations, the
Murphys and the beneficiaries entered into a settlement agreement. The
agreement required the Murphys to restore specific funds to the estate.
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The board eventually filed a complaint against Murphy alleging
unethical conduct. The board claimed Murphy’s conduct in the Doss
estate matter violated Iowa Code of Professional Responsibility for
Lawyers DR 1–102(A)(1) (prohibiting a lawyer from violating a disciplinary
rule); DR 1–102(A)(3) (prohibiting a lawyer from engaging in illegal
conduct involving moral turpitude); DR 1–102(A)(4) (prohibiting a lawyer
from engaging in conduct involving dishonesty, fraud, deceit, or
misrepresentation); DR 1–102(A)(5) (prohibiting a lawyer from engaging
in conduct prejudicial to the administration of justice); DR 1–102(A)(6)
(prohibiting a lawyer from engaging in any other conduct that adversely
reflects on the fitness to practice law); DR 5–101(A) (prohibiting a lawyer
from accepting employment if the exercise of the lawyer’s professional
judgment may be affected by the lawyer’s own financial, business,
property, or personal interest without full disclosure to and consent of
the client); DR 5–101(C) (prohibiting a lawyer or a lawyer’s partners or
associates from preparing an instrument in which a client desires to
name the lawyer beneficially); DR 5–105(B) (requiring a lawyer to decline
proffered employment if the exercise of independent professional
judgment on behalf of a client will be or is likely to be adversely affected
by the acceptance of the proffered employment); DR 5–105(C) (prohibiting
a lawyer from continuing multiple employment if the exercise of
independent professional judgment on behalf of a client will be or is
likely to be adversely affected by the acceptance of the proffered
employment); DR 5–105(E) (requiring a partner, association or law firm of
a lawyer who must decline or withdraw from employment to also decline
or withdraw from employment); and DR 6–101(A)(3) (prohibiting a lawyer
from neglecting a client’s matter).
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In general, Murphy’s response to the board’s complaint was that
he followed the instructions of Doss when taking any action with regard
to her property. He explained that any gifts from Doss to him or Patricia
arose from Doss’s generous nature and close relationship with them.
Murphy denied any undue influence over Doss and described her as a
strong-willed woman with an independent mind, especially with regard to
her finances.
A hearing was held before the grievance commission. The
commission found Murphy violated four disciplinary rules. It found he
violated DR 1–102(A)(1) (prohibiting the violation of a disciplinary rule),
DR 1–102(A)(5) (prohibiting conduct prejudicial to the administration of
justice), DR 1–102(A)(6) (prohibiting conduct that adversely reflects on
the practice of law), and DR 5–105(B) (declining employment when
independent professional judgment on behalf of a client will likely be
adversely affected). Violations under the first three rules were based on
findings by the commission that Murphy failed to comply with several
provisions of the code in representing Patricia in the conservatorship.
These provisions governed self-dealing, gifting, transferring property, and
accounting for assets. The commission not only found Murphy violated
these provisions, but that he also violated the probate code in
representing Patricia in her capacity as executor by failing to disclose
during the probation proceedings the beneficial interest he held in the
life insurance policy. Finally, the commission found Murphy violated
DR 5–105(B) because he should have declined to represent Patricia due
to the personal benefit the two individuals derived from the
conservatorship.
The commission found the board failed to establish Murphy
engaged in conduct involving moral turpitude, dishonesty,
9
misrepresentation, or deceit. It also found the board failed to establish
Murphy prepared an instrument that named him beneficiary and that he
neglected a client matter. Finally, the commission found the board failed
to establish that Murphy impermissibly continued to represent Patricia
in the real estate transaction after their son prepared a title opinion for
the buyer.
The commission recommended that Murphy receive a public
reprimand. The commission declined to impose a more severe
recommendation due to Murphy’s lengthy career, lack of prior
disciplinary action, and the imposition of a settlement agreement with
the residual beneficiaries. The commission also concluded the matter
constituted a one-time lapse of judgment.
II. Standard of Review.
“We review attorney disciplinary proceedings de novo.” Iowa
Supreme Ct. Att’y Disciplinary Bd. v. Wagner, 768 N.W.2d 279, 281 (Iowa
2009). We give the commission’s findings and recommendations
respectful consideration, but are not bound by them. Id. at 282. The
board has the burden of proving attorney misconduct by a convincing
preponderance of the evidence. Id. at 281. Upon proof of misconduct,
the court may impose a lesser or greater sanction than recommended by
the commission. Id. at 282.
III. Discussion of Violations.
Guardianships and conservatorships exist to help needy minors
and adults with impaired decision-making capacity in caring for
themselves or their financial affairs. See Iowa Code § 633.552(2)(a)–(b)
(2011) (describing the categories to support the guardianship); id.
§ 633.566(2)(a)–(b) (describing the categories to support the
conservatorship). When this need is adjudicated, the court appoints a
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person to serve as a guardian or conservator to provide the essential
assistance. See id. § 633.3(7), (20). A guardianship primarily deals with
the needs of people who are unable to care for their own safety or provide
for the basic necessities of life, while a conservatorship primarily
oversees and controls financial needs and matters. 14 Julie L. Pulkrabek
& Gary J. Schmit, Iowa Practice: Probate § 36:1, at 881 (2010).
After a conservatorship is established, the law authorizes the
conservator to take possession of all the property of the ward. Iowa Code
§ 633.640. Correspondingly, the law imposes a duty on the conservator
to protect, preserve, and account for the property, and to perform all
other legal duties required by law. Id. § 633.641. The ward has no
general power to convey or dispose of property once a conservatorship is
established unless authorized by the court. Id. § 633.637. Moreover,
self-dealing by a conservator is specifically prohibited except by court
order. Id. § 633.155. A conservator may make gifts on behalf of a ward
from assets of the conservatorship, but only when authorized by the
court under special circumstances. Id. § 633.668. The conservator is
required to file annual reports with the court that include an inventory of
the property of the conservatorship. Id. § 633.670. The report must also
account for all disbursements and activities concerning the condition of
the conservatorship. Id. §§ 633.670–.671. Overall, the conservator
serves the interest of the ward and the statutory protections exist to
accomplish this goal. Generally, conservators are considered to be
fiduciaries and are liable for a breach of their duties and responsibilities.
Id. §§ 633.649 (recognizing conservators have powers of fiduciaries),
633.160 (making fiduciaries liable for breach of duty).
The legal duties and responsibilities imposed on conservators and
guardians often require the services of an attorney to help navigate
11
through the maze of legal requirements. Although the conservator is the
client of such an attorney, the attorney also normally advances the
interests of the ward in representing the conservator. See Estate of
Leonard ex rel. Palmer v. Swift, 656 N.W.2d 132, 146 (Iowa 2003) (noting
the conservator generally intends the ward to be the beneficiary of the
lawyer’s services because “a conservator has a statutory duty to protect
the estate of a ward”). Thus, an attorney representing a conservator may
owe a duty to the ward as a third-party intended beneficiary to the
contract between the conservator and the attorney. Id. This tripartite
relationship underscores the important entrusted roles of attorneys in
guardianships and conservatorships. In this role, attorneys are guided
not only by the law, but also by their code of professional responsibility.
Murphy failed to follow numerous statutory provisions in
representing Patricia, most notably in changing ownership of numerous
financial accounts owned by Doss into joint accounts owned with
Patricia. His actions allowed Patricia to become the sole owner of these
accounts upon Doss’s death. Murphy generally sought to minimize the
culpability of his conduct by attributing it to Patricia and claiming his
representation of her did not result in any personal gain to himself. He
then minimized Patricia’s conduct by arguing she resolved any
improprieties by settling the claims made against her by the beneficiaries
and by claiming the transfers of property to her were consistent with the
wishes of the ward. Finally, Murphy sought to align his professional
duties only to Patricia and claimed any statutory deficiencies in
representing her were merely the result of oversights and inadvertence.
The positions taken by Murphy obscure the responsibilities
imposed by law and ignores the obvious. After the conservatorship was
established, Murphy actively assisted his wife in arranging the financial
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affairs of Doss so that Patricia would become the sole owner of a
substantial portion of her financial accounts upon Doss’s death. Murphy
and his wife also accepted cash gifts of thousands of dollars from Doss
and even permitted her to purchase a vacuum cleaner for them that cost
nearly $1500. All of these activities were strictly forbidden by the law
without full disclosure and authorization by the court.
Murphy, of course, failed to disclose his actions to the court, and
the evidence clearly supported a finding that he purposely did so to
perpetrate a larger scheme to benefit himself and his wife. If Doss did
intend to include the Murphys in her estate planning during the last
years of her life, the law required Murphy to explain the transactions to
the court and obtain court approval. Moreover, disclosure of this matter
would have given the court the opportunity to appoint a guardian ad
litem to fully and independently consider the interests of Doss, among
other things. The law clearly defined the path Murphy was required to
follow if Doss desired to transfer property to the Murphys. Instead,
Murphy chose to hide his activities from the court and the legal
beneficiaries of Doss’s estate. This obscuration reveals the dishonesty at
the core of Murphy’s actions. In truth, the evidence presented at the
hearing supports a finding that Murphy and Patricia systematically took
advantage of their positions of trust and confidence. Instead of
exercising this trust and confidence as demanded by the law and the
ethics of the legal profession, Murphy secretly rearranged the financial
affairs of an elderly, incompetent woman to benefit himself and his wife.
Murphy’s conduct in transferring property to his wife’s name and
in permitting gifts to be made without disclosure to the court and
authorization by the court violated DR 1–102(A)(3) (prohibiting a lawyer
from engaging in illegal conduct involving moral turpitude), DR 1–
13
102(A)(5) (prohibiting a lawyer from engaging in conduct prejudicial to
the administration of justice), and DR 1–102(A)(6) (prohibiting a lawyer
from engaging in any other conduct that adversely reflects on the fitness
to practice law). Moreover, the conduct violated DR 1–102(A)(4)
(prohibiting a lawyer from engaging in conduct involving dishonesty,
fraud, deceit, or misrepresentation). Murphy purposely engaged in acts
of misrepresentation by failing to disclose the transactions in the annual
reports and by failing to seek court authority to make gifts. His conduct
showed a pattern consistent with deceit, which continued in the
probation proceedings. Murphy was an experienced lawyer who knew
his conduct was wrong, and he sought to keep it from the scrutiny of
others, including the district court. No other honest assessment of the
facts and circumstances can be drawn.
While Murphy’s conduct was serious, he did not violate all of the
disciplinary rules alleged by the board. He did not violate DR 1–
102(A)(1), which prohibits a lawyer from violating a disciplinary rule. We
have held that this rule does not serve as an additional allegation to
another violation of a disciplinary rule. Iowa Supreme Ct. Att’y
Disciplinary Bd. v. Ackerman, 786 N.W.2d 491, 496 n.3 (Iowa 2010).
Most of the other violations alleged by the board were based on
conflicts of interest associated with Murphy’s representation of Patricia
after having represented Doss over the years and Murphy’s acceptance of
assets from Doss during the period of time he represented her. The
board also argued that Doss actually became Murphy’s client during a
time when he was involved in representing Patricia as the conservator.
We conclude the evidence was insufficient to support a violation of
these additional allegations asserted by the board. Instead, the overall
thrust of the misconduct in this case went to Murphy’s violations of the
14
statutes governing conservatorships and his misrepresentation and
deceit. Nevertheless, Murphy did violate DR 5–105(C) when he and his
firm represented both the buyer and the seller in the sale of the Doss
home. The prohibition against representing multiple clients applies even
if the interests are not antagonistic and no fraud, improper notice, or
economic harm exists. Iowa Supreme Ct. Bd. of Prof’l Ethics & Conduct v.
Wagner, 599 N.W.2d 721, 726 (Iowa 1999).
IV. Sanction.
We do not impose a standard sanction for a particular type of
misconduct. Iowa Supreme Ct. Att’y Disciplinary Bd. v. Schmidt, 796
N.W.2d 33, 42 (Iowa 2011). While prior cases can be instructive, we
determine an appropriate sanction based on particular circumstances in
each case. Id. In tailoring this action to the particular circumstances in
each case,
“we consider the nature of the violations, the attorney’s
fitness to continue in the practice of law, the protection of
society from those unfit to practice law, the need to uphold
public confidence in the justice system, deterrence,
maintenance of the reputation of the bar as a whole, and any
aggravating or mitigating circumstances.”
Iowa Supreme Ct. Att’y Disciplinary Bd. v. Casey, 761 N.W.2d 53, 61
(Iowa 2009) (quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v. Ireland,
748 N.W.2d 498, 502 (Iowa 2008)).
We have imposed severe sanctions in the past for unprofessional
conduct by an attorney who engages in self-dealing and deceit during the
course of a guardianship and conservatorship. In Iowa Supreme Court
Board of Professional Ethics & Conduct v. Remer, 646 N.W.2d 91, 96
(Iowa 2002), we suspended a lawyer for three years for engaging in self-
dealing. We recognized the vulnerability of the relationship involved as
guardian and conservator and the need to impose strong discipline to
15
deter others from violating the trust. Id. We also believed suspension
was needed to maintain the integrity of the profession. Id.
The approach taken in Remer is consistent with other disciplinary
cases involving misrepresentation and deceit. We have repeatedly said
that conduct involving “ ‘[d]ishonesty, deceit, and misrepresentation by a
lawyer are abhorrent concepts to the legal profession, and can give rise to
the full spectrum of sanctions, including revocation.’ ” Iowa Supreme Ct.
Att’y Disciplinary Bd. v. Van Beek, 757 N.W.2d 639, 643 (Iowa 2008)
(quoting Iowa Supreme Ct. Att’y Disciplinary Bd. v. Hall, 728 N.W.2d 383,
387 (Iowa 2007)). In the end, the circumstances of each case drive the
sanction in cases involving self-dealing and misrepresentation. See Iowa
Supreme Ct. Bd. of Prof’l Ethics & Conduct v. Allen, 586 N.W.2d 383, 391
(Iowa 1998) (imposing a one-year suspension for conduct involving
unauthorized gifts to attorney from conservatorship and conversion of
funds); see also Van Beek, 757 N.W.2d at 643–44 (imposing a two-year
suspension for misrepresenting authenticity of a will, collecting probate
fee without court approval, and neglect).
We think the sanction in this case falls between the three-year
suspension imposed in Remer and the one-year suspension imposed in
Allen. In Allen, the attorney had a very close relationship with the ward,
the unauthorized gifts were consistent with the intent of the ward, and
the gifts were repaid. In this case, Murphy was very close to the ward,
the ward had gifted and transferred property to Murphy and his wife
prior to the conservatorship, and the relatives of Doss who were the
beneficiaries under the will entered into a settlement agreement over the
matter. In Remer, the attorney had a history of disciplinary action and
expressed no remorse.
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Considering all the particular circumstances of this case, including
all mitigating and aggravating factors, we impose a suspension of not
less than eighteen months. While Murphy has enjoyed a good reputation
in the community over his long career, the actions in this case
constituted calculated deceit and self-dealing. He violated the most basic
tenets of lawyering and violated the trust demanded of Iowa lawyers as
officers of the court.
V. Conclusion.
We suspend Murphy’s license to practice law indefinitely with no
possibility of reinstatement for a period of eighteen months from the
filing of this opinion. The suspension imposed applies to all facets of the
practice of law provided by Iowa Court Rule 35.12(3) and requires
notification to clients as provided by Iowa Court Rule 35.22. The costs of
this proceeding are taxed against Murphy pursuant to Iowa Court Rule
35.26(1).
LICENSE SUSPENDED.
All justices concur except Waterman, Mansfield, and Zager, JJ.,
who take no part.