Hello everyone and welcome to this Ethics Alert which will discuss the recent Florida Supreme Court opinion which rejected a referee’s recommendation that a lawyer be found not guilty, found the lawyer guilty of engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation and trust account violation, and referred the matter to the referee to recommend a sanction. The disciplinary case is The Florida Bar v. Jose Carlos Marrero, No. SC11-1780 (January 15, 2015) and the disciplinary opinion is here: https://www.floridasupremecourt.org/decisions/2015/sc11-1780.pdf
According to the opinion, The Florida Bar alleged that the lawyer violated the Rules Regulating the Florida Bar when he served as an escrow agent for a loan made by a Ms. Gonzalez, and the processing of a related loan from Countrywide Bank. The lawyer and a Mr. Pedrosa were officers of Weston Professional Title Group, Inc. The lawyer was the president and the registered agent and Pedrosa was a mortgage broker. Pedrosa was occasionally involved with Gonzalez and Gonzalez made cash loans to the lawyer’s clients through Pedrosa.
On December 13, 2005, the lawyer accepted a $200,000.00 cashier’s check from Gonzalez that was to be used as a loan. The check was paid through an arrangement between Gonzalez and Pedrosa. The lawyer did not negotiate the agreement with Gonzalez; however, he knew the funds were for a loan to borrowers named Gutierrez and Marrero. The lawyer deposited the $200,000.00 into his trust account on December 15, 2005 and disbursed all of the funds to Gutierrez and Marrero the next day by wire transfer. He did not require the borrowers to sign any document or agreement before disbursement. The funds were disbursed before the note and mortgage were prepared or signed and the mortgage and note were not created until three weeks after the funds were disbursed.
The lawyer did not draft the “second mortgage” and promissory note until January 10, 2006, 25 days after he gave the borrowers the entire $200,000.00. According to the opinion, “(t)his conduct did not protect the interests of lender Gonzalez. As Respondent was a fiduciary responsible for the funds and to all involved parties, these deliberate acts are not negligence. He intentionally disbursed the funds the day after receiving them from Gonzalez, without having the borrowers sign any documents at that time. He performed these actions deliberately and knowingly.”
The lawyer listed the property at issue as collateral for the loan in the “second mortgage”; however, when the mortgage and note were executed on January 11, 2006 and witnessed by the lawyer, the borrowers had no ownership interest in the property which was listed as collateral since they did not purchase the property until January 17, 2006, six days later.
The mortgage deed, which the lawyer prepared, was executed by Gutierrez and Marrero on January 11, 2006, but was not recorded until June 22, 2006; therefore, Gonzalez did not have a recorded interest in the property until six months after the lawyer gave the borrowers the $200,000.00. Gonzalez received the loan closing documents on January 11, 2006; however, the lawyer did not record the Gonzalez mortgage until six months later and he never informed Gonzalez that the funds were being used by the borrowers to purchase the house. Gonzalez was also falsely told that the funds were to be used to make repairs on a house that the borrowers already owned and that her loan was to serve as a second mortgage; however, the borrowers did not own the property until January 17, 2006, the date a loan was settled between the lender Countrywide Bank and the borrowers.
“It is significant that the mortgage loan application executed by Marrero to obtain the Countrywide Bank loan failed to disclose the $200,000 loan from Gonzalez as a liability. In addition, because Respondent delayed for many months before recording the $200,000 Gonzalez loan, his actions prevented the loan from being found by any title search performed for the Countrywide Bank closing on January 17, 2006. Further, the compliance form failed to disclose the $200,000 loan from Gonzalez. The title insurance loan policy, which Respondent signed, also failed to list the Gonzalez loan. Similarly, the Owner’s Policy of Title Insurance did not reflect the $200,000 loan. Respondent’s title company closed the loan and Respondent signed the policy. Eventually, after purchasing the property, the borrowers stopped making payments on the Gonzalez loan. Gonzalez’s efforts to recover her funds were unsuccessful.” The referee recommended that the lawyer be found guilty.
After reviewing the facts, the opinion found that the lawyer violated Bar Rule 4-8.4(c) by “drafting, executing, and witnessing a mortgage loan document containing the misrepresentation that the borrowers had the legal authority to encumber the property. Respondent’s acts were deliberate and prove the element of intent necessary to find a violation of rule 4-8.4(c).”
The opinion also found that the lawyer violated Bar Rule 4-8.4(c) “due to his deliberate omissions and knowing failures to report important information to lender Gonzalez. An attorney serving as an escrow agent has a fiduciary duty to exercise reasonable skill and ordinary diligence in holding and delivering possession of the escrowed property…”
The opinion also found that the lawyer violated Bar Rule 4-8.4(c) “with regard to Countrywide Bank. Respondent knew of the Gonzalez loan prior to the Countrywide Bank closing because he personally drafted the documents for the Gonzalez loan. Despite this knowledge, he did not disclose the $200,000 loan on the list of encumbrances in the title insurance policy that he issued to lender Countrywide Bank. Further, he did not inform Countrywide Bank that the down payment on the property was the money that the borrowers received from Gonzalez. His failures to be truthful created the appearance that the borrowers had invested their own funds into the property…”
Finally, the opinion found that “the evidence demonstrates Respondent violated rule 5-1.1(b) (by disbursing the funds). The rule plainly states that “(m)oney or other property entrusted to an attorney for a specific purpose…is held in trust and must be applied only to that purpose.”
The Court referred the case back to the referee to hold a hearing and to consider the appropriate sanction. “The referee shall consider evidence, make findings of fact regarding possible aggravating and mitigating factors, and submit an Amended Report of Referee to the Court recommending a disciplinary sanction. In addition, the referee shall determine the amount of costs to award The Florida Bar as the prevailing party. The referee shall file the Amended Report with the Court within ninety days of the date of this opinion.”
Bottom line: This is a rare case where the Supreme Court of Florida reversed a referee’s finding of not guilty, found a lawyer guilty, and referred the case back to the referee for sanction. Since the Court found 3 violations of Florida Bar Rule 4-8.4(c) by engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation, the lawyer faces a very serious sanction.
Be careful out there.
Disclaimer: this e-mail is not an advertisement, does not contain any legal advice, and does not create an attorney/client relationship and the comments herein should not be relied upon by anyone who reads it.
Joseph A. Corsmeier, Esquire
Law Office of Joseph A. Corsmeier, P.A.
2454 McMullen Booth Road, Suite 431
Clearwater, Florida 33759
Office (727) 799-1688
Fax (727) 799-1670