Conflict of interest rules governing business transactions with clients require, at a minimum, that a lawyer suggest to the client that the client seek independent legal advice from a lawyer, not a non-legal professional.
Attorney Grievance Commission of Maryland v. Virgil Duane Parker, 2004 Misc. Docket AG No. 26 (Md. Court of Appeals (2005). Parker, who was licensed in 1985,was disbarred. He practiced law and operated a real estate brokerage firm in Easton, Maryland. Regarded by colleagues as being very organized, he was also said to have a very good knowledge of the cases that he handled and was a "Nervous Nellie when it came to doing things things the right way." In the 1990's, he began providing legal services to an elderly couple, the McPeakes. The McPeakes owned a farm that consisted of between 70 and 100 acres of land. Over a three-year period, the land was sold in three parcels for an aggregate sale price of $961,125. Parker received a 5% commission, including travel expenses, on the entire sale price. After the sale of the first parcel, the McPeakes discussed the prospect of loaning Parker $70,000 to help him finance the purchase of property in Tennessee, where Parker intended to relocate. The loan was to be secured by a mortgage on real property in Maryland owned by Parker and his wife. Parker never advised the McPeakes to seek independent legal counsel, although he did suggest that they talk to a mutual friend, a banker. The banker did not know the purpose or the terms of the loan, but did attest to Parker's trustworthiness and informed the couple about prevailing interest rates. The McPeakes loaned Parker $70,000 at 8% annual interest. Parker prepared the mortgage intended to secure the loan. The mortgage document was defective, however, because Parker failed to include his wife as a borrower or have her sign the mortgage. He also failed to include a description of the property or even a reference to the liber and folio where the deed by which he and his wife obtained the property was recorded. Further, Parker never recorded the mortgage. Inevitably, he made no payments on the loan. He did manage to somehow acquire an additional 10% commission on the sale of the remaining two parcels. The elderly couple's daughter eventually learned about the loan and the additional commissions, and the couple filed suit against Parker and lodged a grievance with Bar Counsel. Bar Counsel charged Parker with fraud, charging excessive fees, engaging in a conflict of interest and with failing to communicate properly with clients. Parker defended himself, in relevant part, by arguing that he obtained the additional commissions by mistake and that he merely erred by creating the ineffective mortgage document. The Court rejected the arguments and noted that Parker was too experienced a real estate practitioner to have so erred. As to the conflict, Parker suggested that, by consulting a banker, the couple had satisfied the 'independent' advice provision contained in the ethics code. Specifically, he urged that the rule does not require that the independent 'counsel' be a lawyer; a banker would do. The Court responded by stating:
This is not the case. We need not consider here whether, in situations here non-legal advice would be important to assure that the client can make an informed decision regarding the proposed transaction, the Rule may require a lawyer to suggest that the lawyer suggest that the client consult someone capable of giving that advice-an accountant, an insurance professional, for example. Unquestionably, the Rule requires, at a minimum, that the lawyer suggest seeking independent legal advice from a lawyer. That was especially critical in this case. A competent independent lawyer would never have permitted the transaction to proceed as it did, with an ineffective, unrecorded mortgage that failed to provide the promised security for the loan.