By Kurt R. Mattson
Personal liability is a risk in any estate matter.
The Maryland Court of Appeals recently held that an attorney violated the state laws of professional conduct because, as a personal representative, he sold property that didn’t belong to an estate. The attorney sold a piece of property to the first person interested in buying it—without appraising it or verifying its ownership. He then refused to correct his error, contrary to his duty. Further, the Court said the attorney also violated the state laws of professional conduct because he refused to try to recover the property, which exposed the estate to liability.
Judge Robert N. McDonald of the Maryland Court of Appeals wrote:
No one who has practiced law for any appreciable time can claim to have never made a mistake in that practice. A mistake in the practice of law is not necessarily professional misconduct. However, once aware of a mistake that harms another and given the opportunity to mitigate it, a lawyer who decides to do nothing may be guilty of misconduct.
A Maryland attorney with substantial experience in the field of estates and trusts law was appointed as successor personal representative for an estate that had just one asset, the decedent's home. In handling the estate, the attorney made a mistake: in preparing the property for sale, he found a piece of property that had been stored there by one of the adult children. Without determining the property’s ownership or value, he sold it to an individual who happened to be present for $500. That turned out to be a small fraction of its actual value, roughly $15,000.
The attorney used cash from the sale to pay the locksmith for changing the locks on the property and to reimburse himself for the purchase of the "no trespassing" signs.
Once the attorney became aware of his mistake and given the opportunity to remedy the situation, he chose not to do so, apparently out of his personal ill feelings toward its owner. The attorney explained to the owner that he could file a claim in the Orphans' Court against the estate.
In late summer 2014, the attorney sold the estate property for $166,000.
In the meantime, the attorney was sued individually to recover the value of the non-estate property. The District Court found in favor of the owner for $9,700, based on the court's estimate of the value of the property when the attorney erroneously sold it. At the trial, the attorney repeatedly told the District Court that he had sold the non-estate property in his capacity "as a fiduciary" and insisted that any judgment be entered against him only in his capacity as personal representative of the estate. The District Court agreed to his request, effectively making it a judgment against the estate.
The hearing judge concluded that the attorney violated MLRPC 8.4(d), and also indicated that the attorney's conduct failed to meet the standards of competence and diligence required by Maryland Lawyer's Rules of Professional Conduct 1.1 and 1.3. Based upon the hearing judge's findings of fact, the Court of Appeals agreed that the attorney's conduct violated both MLRPC 1.1 and 1.3.
MLRPC 1.1 requires that an attorney "provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness and preparation reasonably necessary for the representation." An attorney may have adequate knowledge or skill to represent a client, but a failure to apply that knowledge or skill as necessary violates MLRPC 1.1.
The hearing judge found that by refusing to make a diligent attempt to recover the property, the attorney exposed the estate to liability that could have been avoided.
Under MLRPC 8.4(a), it’s professional misconduct for a lawyer to "violate or attempt to violate the [MLRPC]." Because The attorney violated MLRPC 1.1, 1.3, and 8.4(d), he necessarily also violated MLRPC 8.4(a).
Under MLRPC 8.4(d), it is professional misconduct for a lawyer to "engage in conduct that is prejudicial to the administration of justice." Conduct violates MLRPC 8.4(d) when it falls "below the standards that the public normally expects of attorneys" and when an attorney compounds that misconduct by failing to take steps to correct it.
The hearing judge concluded that, once the attorney learned of his mistake in the sale of the property, he had a responsibility to correct — or at least attempt to correct — that mistake. Judge McDonald and the Court of Appeals agreed with the hearing judge that the attorney's failure to even attempt to recover the property, after he learned that the estate did not own it, fell below the standard the public expects of attorneys and was prejudicial to the administration of justice.
In failing to correct his mistake, the attorney exposed the estate to unnecessary liability and ultimately a judgment against it. The Court of Appeals agreed with the hearing judge that this was a "clear abuse of discretion" — i.e., the discretion he exercised in carrying out his fiduciary responsibilities as personal representative of the estate. This conduct fell below the standard that the Court and the public expects of attorneys, and was thus prejudicial to the administration of justice.
Sanction and Attorney Reprimand
Judge McDonald explained that the purpose of a sanction in an attorney discipline case is not so much to punish the attorney, as it is to protect the public and deter future misconduct. An appropriate sanction must relate to the facts and circumstances of the particular case and be "commensurate with the nature and gravity of the violations and the intent with which they were committed."
Whether the attorney's decision to sell the property on the spot was excusable, it was certainly a mistake, Judge McDonald said. As the attorney repeatedly stated at the trial, he was acting "as a fiduciary" — i.e., acting with a duty to exercise a higher standard of care for the benefit of the estate and its beneficiaries — when he sold the property. Even if the attorney truly believed that the property belonged to the estate, Judge McDonald said it hardly seemed prudent to impulsively sell it to the only person present who expressed any interest in it without making a minimal effort to determine its actual value. The result was that he sold it at a discount of 95% of the District Court's valuation.
Here, there were also two aggravating factors: refusal to acknowledge the wrongful nature of the conduct and substantial experience in the practice of law.
The Court of Appeals adopted Bar Counsel's recommendation and found that a reprimand of the attorney served the primary purposes of the sanction: to protect the public and deter future offenses without disrupting his practice of law. A reprimand signals to the sanctioned attorney, other attorneys, and the public that the Court of Appeals takes violations of the professional conduct rules seriously. Atty. Griev. Comm'n of Md. v. Woolery, 456 Md. 483 *; 175 A.3d 129 (Md. Ct. App. December 15, 2017).
About the Author
Kurt R. Mattson is the President of Union Legal Research. He is the former Director of Library Services and Continuing Education at Lionel Sawyer & Collins in Las Vegas. Prior to this, he worked at BNA and other legal publishers, spending a substantial portion of his career working for Thomson Reuters. He serves as a consultant for several businesses, law firms, and marketing companies.
Kurt received his JD from William Mitchell College of Law and his Masters of Law (LLM) from George Washington University. He received his Masters of Library Information Science (MLIS) from Wayne State University.
Kurt is the editor of Lexis’ BSA/AML Update, co-author of A.S. Pratt’s Mortgage Procedure Guide to Federal and State Compliance, and author of Fair Debt Collection Practices: Federal and State Law and Regulation. He is also a contributing author of Brady on Bank Checks. Kurt is also a contributor to other business and legal publications.