Ohio State Bar Assn. v. Dalton

[Cite as Ohio State Bar Assn. v. Dalton, 124 Ohio St. 3d 514, 2010-Ohio-619.]
OHIO STATE BAR ASSOCIATION v. DALTON ET AL.
[Cite as Ohio State Bar Assn. v. Dalton,
124 Ohio St. 3d 514, 2010-Ohio-619.]
Unauthorized practice of law — Drafting of deeds — Injunction and civil penalty
— Bankruptcy — Penalties for unauthorized practice of law not
discharged — Proceedings to prevent unauthorized practice of law not
subject to automatic stay.
(No. 2009-1643 — Submitted November 4, 2009 — Decided March 2, 2010.)
ON FINAL REPORT by the Board on the Unauthorized Practice of Law of the
Supreme Court, No. UPL 07-06.
__________________
Per Curiam.
{¶ 1} Relator, Ohio State Bar Association, alleged that respondents,
Kimberly A. Dalton and Precision Land Title Agency, Inc. (“Precision Title”),
had engaged in the unauthorized practice of law by preparing and completing two
real estate general warranty deeds and by forging an attorney’s signature on one
of them. The Board on the Unauthorized Practice of Law agreed, concluding that
the respondents had practiced law in violation of Ohio attorney licensure
requirements, and recommends that we enjoin respondents from engaging in the
practice of law, require respondents to disclose their clients to the relator and
board and notify their clients of their conduct, and require respondents to pay a
civil penalty. We agree that respondents engaged in the unauthorized practice of
law, and we therefore impose the sanctions the board recommends.
Unauthorized Practice of Law
{¶ 2} This court has original jurisdiction over the “[a]dmission to the
practice of law, the discipline of persons so admitted, and all other matters
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relating to the practice of law,” Section 2(B)(1)(g), Article IV, Ohio Constitution,
which includes regulating the unauthorized practice of law for the purpose of
protecting the public from persons and entities purporting to provide legal
assistance to others but “who have not been qualified to practice law and who are
not amenable to the general discipline of the court.” Union Sav. Assn. v. Home
Owners Aid, Inc. (1970), 23 Ohio St. 2d 60, 64, 52 O.O.2d 329, 262 N.E.2d 558.
{¶ 3} “The unauthorized practice of law is the rendering of legal services
for another by any person not admitted to practice in Ohio under Rule I and not
granted active status under Rule VI, or certified under Rule II, Rule IX, or Rule
XI of the Supreme Court Rules for the Government of the Bar of Ohio.” Gov.Bar
R. VII(2)(A). “In Land Title Abstract & Trust Co. v. Dworken (1934), 129 Ohio
St. 23, 1 Ohio Op. 313, 193 N.E. 650, we made clear that the practice of law embraces
the preparation of legal documents on another’s behalf, including deeds which
convey real property.” Disciplinary Counsel v. Doan (1997), 77 Ohio St. 3d 236,
237, 673 N.E.2d 1272.
Bankruptcy
The Automatic Stay Is Not Applicable to Governmental Proceedings
to Prevent the Unauthorized Practice of Law
{¶ 4} Before the board issued its final report, Precision Title was
dissolved, and Dalton filed for Chapter 7 bankruptcy.
{¶ 5} The general rule is that filing for bankruptcy automatically stays
the commencement or continuation of judicial and administrative actions against a
debtor that were or could have been initiated prior to the bankruptcy filing to
recover on a claim that arose before the filing. Section 362(a), Title 11,
U.S.Code. However, under Section 362(b)(4), Title 11, U.S.Code, bankruptcy
does not stay commencement or continuation of an action or proceeding by a
governmental unit to enforce its police or regulatory powers. Chao v. BDK
Industries L.L.C. (C.D.Ill.2003), 296 B.R. 165, 167; In re Baillie
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January Term, 2010
(Bankr.W.D.Pa.2007), 368 B.R. 458, 466. “ ‘[G]overnmental unit’ ” includes a
“department, agency or instrumentality * * * of a state” that carries out a
government function. Section 101(27), Title 11, U.S.Code; In re Wade (C.A.9,
1991), 948 F.2d 1122, 1123.
{¶ 6} The board is an instrumentality of this court charged with the
obligation to investigate and prosecute the unauthorized practice of law. Gov.Bar
R. VII. We have recognized that “along with [our] broad regulatory power over
the practice of law comes ‘the concomitant responsibility to protect the public by
preventing the unauthorized practice of law.’ ” Cleveland Bar Assn. v.
CompManagement, Inc., 104 Ohio St. 3d 168, 2004-Ohio-6506, 818 N.E.2d 1181,
¶ 48, quoting Henize v. Giles (1986), 22 Ohio St. 3d 213, 217, 22 OBR 364, 490
N.E.2d 585. The board is an instrumentality of the state that is charged with
protecting the public from the unauthorized practice of law. Consequently, we
hold that pursuant to Section 362(b)(4), Title 11, U.S.Code, Dalton’s bankruptcy
does not stay these proceedings arising from the unauthorized practice of law.
Bankruptcy Does Not Discharge the Civil Penalty
{¶ 7} Under Section 523(a)(7), Title 11, U.S.Code bankruptcy will not
discharge an individual from a debt “to the extent such debt is for a fine, penalty,
or forfeiture payable to and for the benefit of a governmental unit, and is not
compensation for actual pecuniary loss, other than a tax penalty.”
{¶ 8} We can find no case that addresses whether a civil penalty imposed
for engaging in the unauthorized practice of law is a penalty or fine within Section
523(a)(7), Title 11, U.S.Code. However, following the reasoning that monetary
sanctions imposed in an attorney discipline case are penal, courts have reasoned
that such sanctions constitute a fine, penalty, or forfeiture within the meaning of
Section 523(a)(7), Title 11, U.S.Code and therefore are not discharged in
bankruptcy. In re Logal (Bankr.N.D.Ind.2007), 381 B.R. 706, 713; In re Bertsche
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(Bankr.S.D.Ohio 2000), 261 B.R. 436. We find this reasoning applicable herein
even though this case involves the unauthorized practice of law.
{¶ 9} There is no evidence that the board imposed the civil penalty to
recover a pecuniary loss. Further, the board recommends a $20,000 civil penalty
because of relators’ “egregious and fraudulent conduct.” Therefore, we find that
the civil penalty herein is a fine or penalty within Section 523(a)(7), Title 11,
U.S.Code. Consequently, Dalton’s bankruptcy would not discharge the board’s
recommended $20,000 civil penalty.
Respondents Engaged in the Unauthorized Practice of Law
{¶ 10} In 1993, David B. Bennett, who is an attorney licensed to practice
in Ohio, founded Precision Title, a title insurance company. Bennett was the sole
shareholder of Precision Title. Precision Title hired Dalton as an office manager
and vice president. Dalton was licensed by the Ohio Department of Insurance as
a resident title agent, but she was not an attorney.
{¶ 11} In 2000, Bennett sold Precision Title to Dalton. Several years
later, Bennett was informed by title insurance companies that there were problems
with two deeds, identified as the Larison and Cargle deeds, that purported to have
been prepared by Bennett. The Cargle deed had been prepared in 2004, and the
Larison deed in 2005. The Cargle deed had the printed notation “Certified True
Copy Precision Land Title Agency Inc.”; the Larison deed had the handwritten
notation “March 2000 sold Precision.” The Larison deed also contained what
purported to be Bennett’s signature.
{¶ 12} However, Bennett asserted that he had had no contact with either
Precision Title or Dalton after he sold Precision Title to Dalton in 2000.
Consequently, Bennett asserted that he had not prepared either deed. He also
asserted that he had not signed the Larison deed or given anyone permission to
sign it on his behalf. Finally, Bennett asserted that in his opinion, the Cargle deed
was defective.
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January Term, 2010
{¶ 13} From October 1, 2007, to February 5, 2008, relator unsuccessfully
attempted to serve a complaint on respondents alleging that they had engaged in
the unauthorized practice of law. Meanwhile, however, relator did reach Dalton
by e-mail. And on April 6, 2007, Dalton sent an e-mail to relator’s counsel,
which stated: “I can assure you that I would not have authorized [the Cargle] deed
nor would anyone who was employed by Precision at that time have prepared a
deed with Mr. Bennett’s name on it deliberately.”
{¶ 14} Almost a month later, Dalton sent a letter to relator’s counsel in
which she offered to “conclude this matter” by paying attorney Bennett for
preparation of the Cargle deed.
{¶ 15} On April 28, 2008, relator served the complaint on respondents.
Because respondents failed to file a responsive pleading, relator moved the board
for default judgment. A panel of the board granted relator’s motion for default
judgment and ordered that the matter proceed pursuant to Gov.Bar R. VII(7)(E).
On September 14, 2009, the board issued its final report, which concluded that
respondents had engaged in the unauthorized practice of law. We agree.
{¶ 16} The copies of the Larison and Cargle deeds in evidence have
notations on them referring to “Precision” or “Precision Title Agency Inc.,” and
both indicate that they were prepared by attorney Bennett. However, Bennett had
no affiliation with Precision Title after 2000; consequently he did not prepare or
sign either deed. We find that this evidence demonstrates that respondents
prepared and filed both deeds and that respondents forged Bennett’s signature on
the Larison deed. Thus, we agree with the board that respondents engaged in the
unauthorized practice of law because Dalton was not an attorney and Precision, as
a corporation, cannot practice law. Cincinnati Bar Assn. v. Mid-South Estate
Planning, L.L.C., 121 Ohio St. 3d 214, 217, 2009-Ohio-747, 903 N.E.2d 295,
quoting the board report and citing Judd v. City Trust & Sav. Bank (1937), 133
Ohio St. 81, 10 Ohio Op. 95, 12 N.E.2d 288 (“ ‘With limited exception, a corporation
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may not give legal advice, directly or indirectly, through its employees or attorney
employees’ ”).
{¶ 17} Dalton’s e-mail claims that the appearance of Bennett’s name on
the Cargle deed must have been a mistake. However, Dalton’s claim lacks
credibility because 19 months after preparing the Cargle deed under Bennett’s
name, respondents prepared the Larison deed again under Bennett’s name and this
time forged his signature to the deed as well. We find that this conduct suggests
that respondents’ actions regarding both deeds were intentional.
{¶ 18} Accordingly, we find that respondents engaged in the unauthorized
practice of law by preparing and filing the Larison and Cargle deeds and by
forging Bennett’s signature on the Larison deed.
Sanctions
{¶ 19} Having found that respondents engaged in the unauthorized
practice of law, we now examine the sanctions recommended by the board.
{¶ 20} The board recommends that we enjoin the respondents from
engaging in the unauthorized practice of law and that we order respondents to
disclose their clients to the relator and board and notify them of respondents’
unauthorized practice of law. Pursuant to Gov.Bar R. VII(8)(B), the board also
recommends that we assess a civil penalty against respondents. In recommending
a civil penalty, the board adopted the panel’s weighing of the civil-penalty factors
in Gov.Bar R. VII(8) and UPL Reg. 400. However, due to respondents’
“egregious and fraudulent conduct in the use of Attorney Bennett’s name and
signature on the deeds in question, Dalton’s offer of payment to ‘conclude the
matter,’ Respondents’ disregard for the Board’s proceedings, and their refusal to
cooperate with Relator, which has prevented Relator from identifying any other
deeds Respondents may have prepared,” the board recommends a civil penalty of
$20,000.
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January Term, 2010
{¶ 21} We adopt the board’s recommended sanctions. Accordingly, we
enjoin respondents and their officers, agents, employees, successors, and assigns
from drafting deeds or otherwise engaging in the unauthorized practice of law.
We also order respondents to disclose to the board and the relator, within 30 days
of the court’s order, the names and addresses of all of respondents’ clients named
as grantor or grantee in any deed or other legal instrument prepared by
respondents and the names and addresses of any lenders or title insurance
companies involved in the transaction. Finally, we order respondents, within 60
days of the court’s order, to notify in writing each of respondents’ clients named
as grantor or grantee in any deed or other legal instrument respondents prepared
and any lender or title insurance company involved in the transaction. Each
notice should indicate that respondents engaged in the unauthorized practice of
law by preparing deeds purporting to convey real estate and should include copies
of the board’s final report and the court’s opinion. Finally, we impose a civil
penalty of $20,000 ($10,000 for each deed prepared by respondents) against
respondents, jointly and severally. Costs are taxed to respondents.
Judgment accordingly.
MOYER, C.J., and PFEIFER, LUNDBERG STRATTON, O’CONNOR,
O’DONNELL, LANZINGER, and CUPP, JJ., concur.
__________________
Fitch, Kendall, Cecil, Robinson & Barry Co., L.P.A., and Ian Robinson;
and Eugene P. Whetzel, General Counsel, for relator.
______________________
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