City and County of Denver District Court No. 13CV390, Honorable John W. Madden, IV, Judge.
Cox Baker & Page, LLC, Anne Whalen Gill, Castle Rock, Colorado, for Plaintiff-Appellant.
James Law Firm, P.C., Eric M. James, Fort Collins, Colorado, for Defendant-Appellee Diane L. Mayberry.
Miller & Steiert, P.C., Gary M. Clexton, Christopher J. Forrest, Littleton, Colorado, for Defendant-Appellee Desiree L. Mayberry.
¶ 1 If a lawyer enters into a contract with a client that violates Colo. RPC 1.8(a), one of the Colorado Rules of Professional Conduct, can the attorney later enforce the contract against the client? Appellate courts in Colorado have not previously addressed this question. We conclude that the answer to this question is "no."
¶ 2 The attorney, plaintiff, David Ross Calvert, asks us to reverse the summary judgment that the trial court entered in favor of his former client, defendant Diane L. Mayberry, also known as Diane Marie Laba-Mayberry, and her daughter, defendant Desiree L. Mayberry. We disagree with the attorney's contentions, so we affirm the judgment. We also remand the case to the trial court to (1) determine whether the attorney prosecuted this appeal for the sole purpose of harassing the former client and her daughter or of delaying the resolution of these proceedings; and (2) if so, award the former client her daughter reasonable attorney fees related to this appeal.
¶ 3 In a 2009 disciplinary proceeding, the Colorado Supreme Court disbarred the attorney after a hearing board determined he had committed ethical violations that involved several people whom he had previously represented. People v. Calvert, 280 P.3d 1269 (Colo. O.P.D.J. 2011). As is relevant to this case, the hearing board found that the attorney had "plied a vulnerable client" - the former client in this case - "with loans in excess of one hundred thousand dollars." Id. at 1272.
To secure his interest in those loan funds, he recorded a false deed of trust on the [former] client's home in a second client's name without the clients' knowledge or consent. [The attorney] then attempted to persuade the second client to assign the deed of trust to [the attorney's] real estate company which, when taken together with his earlier acts, signal[ed] a calculated scheme to deprive [the former] client of her home.
¶ 4 One finding that supported the hearing board's decision to disbar the attorney - the ultimate sanction in the hearing board's quiver - was that the former client was "the epitome of a vulnerable victim: she suffer[ed] from mental illness and a severe chemical dependency, both of which significantly impair[ed] her judgment." Id. at 1287. The board also ordered the attorney to pay any attorney fees that the former client incurred to remove the false deed of trust from the chain of title on her house.
¶ 5 The hearing board also found that the attorney had not complied with any of the requirements of Colo. RPC 1.8(a) when he made the loans to the former client. Those requirements are:
A lawyer shall not enter into a business transaction with a client or knowingly acquire an ownership, possessory, security or other pecuniary interest adverse to a client unless:
(1) the transaction and terms on which the lawyer acquires the interest are fair and reasonable to the client and are fully disclosed and transmitted in writing in a manner that can be reasonably understood by the client;
(2) the client is advised in writing of the desirability of seeking and is given a reasonable opportunity to seek the advice of independent legal counsel on the transaction; and
(3) the client gives informed consent, in a writing signed by the client, to the essential terms of the transaction and the lawyer's role in the transaction, including whether the lawyer is representing the client in the transaction.
Colo. RPC 1.8(a).
¶ 6 The attorney then filed this case to recoup the money that he had loaned the former client. He claimed that she had entered into an oral contract with him to repay the money that he had loaned to her by giving him a security interest in her house.
¶ 7 The attorney alternatively asserted that the trial court should impose an equitable lien on the former client's house. The attorney also filed claims against the former client's daughter because the former client had quitclaimed her interest in the house to her daughter sometime after the attorney had loaned her the money. (The hearing board described the oral contract this way: the attorney had offered the former client a loan to remodel her house "on the understanding that the [former client] would repay [the attorney] out of the equity of her house." Id. at 1275.)
¶ 8 The former client and her daughter filed a motion for summary judgment. They asserted that the attorney could not enforce the oral contract because (1) the hearing board had disbarred him; and (2) the board had disbarred him because he had violated an ethical rule when he engaged in the same conduct - loaning money to the former client - that he asserted to be the substance of the oral contract.
¶ 9 The trial court granted the summary judgment motion in a thoughtful and detailed order. The court observed that, "[g]iven the importance of [Rule 1.8(a)] in protecting clients, permitting [the attorney] to reap the benefits of an agreement that he was ethically prohibited from entering [into] cannot be countenanced." So, "[a]s a general matter, and especially in light of the facts of this case, " the oral contract between the attorney and the former client "violate[d] the letter and purposes of [Rule 1.8(a), ] and [it is] therefore void as against public policy and unenforceable." (Emphasis added.)
II. The Record Supports the Trial Court's Decision to Grant the Summary Judgment Motion
A. Summary Judgment Principles
¶ 10 We review a grant of summary judgment de novo. A.C. Excavating v. Yacht Club II Homeowners Ass'n, 114 P.3d 862, 865 (Colo. 2005). "Summary judgment is appropriate when the pleadings and supporting documents clearly demonstrate that no issues of material fact exist and the moving party is entitled to judgment as a matter of law." Id.; see C.R.C.P. 56(c). We give the nonmoving party the benefit of all favorable inferences that may be drawn from the undisputed facts, and we resolve all doubts as to the existence of a triable issue of fact against the moving party. A.C. Excavating, 114 P.3d at 865.
¶ 11 Our first step in resolving this appeal is to determine whether the doctrine of issue preclusion bars the attorney from relitigating factual issues that were litigated during the disciplinary proceeding.
B. The Hearing Board's Findings Bind the Attorney Under the Doctrine of Issue Preclusion
¶ 12 The doctrine of issue preclusion bars relitigation of an issue if:
(1) the issue is identical to that actually and necessarily adjudicated in a prior proceeding; (2) the party against whom estoppel is asserted was a party or in privity with a party in the proceeding; (3) there was a final judgment on the merits; and (4) the party against whom estoppel is asserted ...