In re Biscanin – Per Curiam ( 2017 )

IN THE SUPREME COURT OF THE STATE OF KANSAS
No. 115,002
In the Matter of JOHN P. BISCANIN,
Respondent.
ORIGINAL PROCEEDING IN DISCIPLINE
Original proceeding in discipline. Opinion filed March 24, 2017. Two-year suspension, stayed
after 6 months; respondent then to be placed on 2 years' supervised probation.
Stanton A. Hazlett, Disciplinary Administrator, argued the cause and was on the brief for the
petitioner.
Steven R. Smith, of Gates Shields Ferguson Hammond, P.A., of Overland Park, argued the cause
and was on the brief for respondent, and John P. Biscanin, respondent, argued the cause pro se.
Per Curiam: This is a contested original proceeding in discipline filed by the
office of the Disciplinary Administrator against the respondent, John P. Biscanin, of
Kansas City, an attorney admitted to the practice of law in Kansas in 1968.
On June 16, 2015, the office of the Disciplinary Administrator filed a formal
complaint against the respondent alleging violations of the Kansas Rules of Professional
Conduct (KRPC). The respondent filed an answer on July 24, 2015, and an amended
answer on September 14, 2015. A hearing was held on the complaint before a panel of
the Kansas Board for Discipline of Attorneys on September 25, 2015, where the
respondent was personally present and represented by counsel. The hearing panel
determined that the respondent violated KRPC 1.8(a) (2017 Kan. S. Ct. R. 307)
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(conflict of interest), 1.15(a) and (b) (2017 Kan. S. Ct. R. 326) (safekeeping property),
and 1.15(d)(1) and (d)(2) (preserving client funds).
Upon conclusion of the hearing, the panel made the following findings of fact and
conclusions of law, together with its recommendation to this court:
"Findings of Fact
....
"8. In 2010, R.K. retained the respondent to represent him concerning the
estate of a friend, M.S. M.S. died March 10, 2010, leaving a holographic will that left the
bulk of M.S.'s estate to R.K. The respondent agreed to represent R.K. on a one-third
contingency fee basis.
"9. The administration of M.S.'s estate was complicated because after she
executed the holographic will leaving the bulk of her estate to R.K., M.S. executed a
subsequent will. In the subsequent will, M.S. left the bulk of her estate to K.D., another
friend of M.S. The same day M.S. executed the subsequent will, M.S. had a stroke. It
appears that M.S. lacked the requisite mental capacity for the subsequent will to be valid.
In addition, M.S. also left a half-brother, D.S. D.S. was M.S.'s sole legal heir. According
to R.K., M.S. intended to disinherit D.S. D.S. contested the two wills and sought
administration of M.S.'s estate through intestate succession.
"10. K.D., D.S., and R.K. settled the dispute over M.S.'s estate. As a result of
the settlement agreement, R.K. received a lump sum payment of $34,350, a Harley-
Davidson motorcycle, and up to $70,000 in settlement proceeds from a pending wrongful
death case regarding M.S.'s husband who died in 2006.
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"11. On March 8, 2011, the respondent received a check in the amount of
$34,350 for R.K. in conjunction with the settlement of M.S.'s estate. The respondent
deposited the settlement proceeds into his attorney trust account.
"12. On March 23, 2011, the respondent issued a check to R.K., in the amount
of $10,000. On April 8, 2011, the respondent issued a second check to R.K., in the
amount of $13,447. The balance in the respondent's trust account was the respondent's
fee. [Footnote: The respondent agreed to a one-third contingent attorney fee. One-third
of $34,350 is $11,450. However, only $10,903 remained after R.K. received his share. A
note on Exhibit 6, p. 95 explains the difference. The note provides '2/3 of settlement +
$547.' Two-thirds of $34,350 is $22,900. Adding $547 to $22,900 is $23,447, the amount
paid to R.K. It is unclear what the $547 referenced.]
"13. R.K. received the checks and cashed the checks. Later, R.K. asked the
respondent to hold $10,000 in cash. The respondent agreed to hold the money on behalf
of R.K. The respondent did not deposit the $10,000 in his attorney trust account. Rather,
the respondent placed $10,000 cash in a safe located in the respondent's office. At some
point, at the request of R.K., the respondent returned the money to R.K.
"14. Later, R.K. again gave the money to the respondent a second time. The
respondent testified that R.K. asked him to hold it on his behalf. R.K. testified that the
respondent asked to borrow $10,000 to invest in a bar. Regardless of how it came to be,
the respondent again held R.K.'s $10,000 for him.
"15. The respondent did not deposit the entire $10,000 into his attorney trust
account. However, it appears that on September 18, 2012, the respondent deposited
$8,000 cash held on behalf of R.K., into his attorney trust account.
"16. The respondent agreed to pay R.K. 6% per annum on the $10,000. The
respondent testified that he executed a promissory note, but the respondent was unable to
locate the promissory note. The respondent testified that he agreed to pay R.K. 6% per
annum on the $10,000 and created a promissory note, not because it was a business
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transaction or a loan, but because he wanted to show R.K. that someone did care for him
and wanted to do something for him.
"17. The hearing panel finds the respondent's explanation of the agreement to
pay 6% per annum and the purported promissory note to be unbelievable. Rather, the
hearing panel finds that the respondent agreed to pay R.K. 6% per annum on the $10,000
because the respondent and R.K. entered into a business transaction. The respondent did
not inform R.K. that he had the right to and should seek independent counsel to advise
him regarding the business transaction. Additionally, the respondent did not seek a
waiver of the conflict of interest from R.K.
"18. From time to time, R.K. asked the respondent to pay the interest on the
$10,000. Additionally, from time to time, R.K. asked the respondent to pay the principal
amount of $10,000. The respondent failed to pay R.K. the principal and interest as
requested by R.K.
"19. Because the respondent failed to pay the $10,000 and interest, on
November 3, 2014, R.K. filed a complaint with the disciplinary administrator's office.
Thereafter, on December 18, 2014, the respondent paid R.K. $11,966.81, for the principal
and interest. In addition, the respondent paid R.K. $317.42, as the remaining amount held
in trust for R.K.
"20. In accordance with the settlement of M.S.'s estate, in addition to the
$32,350, the respondent also received $70,000 on behalf of R.K., as follows:
Date Deposited into Attorney Trust Account Amount
June 22, 2012 $15,344.13
July 6, 2012 $427.55
September 18, 2012 $2,138.15
January 8, 2013 $19,642.37
January 9, 2013 $2,161.06
March 15, 2013 $10,721.32
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July 25, 2013 $19,565.42
TOTAL $70,000.00
"21. The respondent's one-third contingent attorney fee from the $70,000 was
$23,333.33. However, from the records, it is unclear when the respondent removed his
attorney fees from the attorney trust account.
"22. R.K. should have received $46,666.67 of the $70,000. It appears that
R.K. received $41,644.26 as follows:
Date Amount Paid Amount
August 13, 2012 $10,086.90
October 18, 2012 $11,425.00
October 30, 2012 $150.00
February 1, 2013 $14,686.00
July 10, 2013 $5,296.36
TOTAL $41,644.26
"23. In addition to the amounts paid to R.K., it appears that the respondent
paid out attorney fees to Philip Carson, attorney fees for additional representation to the
respondent, and a bond, as follows:
Date Recipient Amount
April 23, 2013 Respondent $2,500.00
May 3, 2013 Philip Carson $415.00
June 24, 2013 Philip Carson $811.18
July 25, 2013 Respondent $5,000.00
July 31, 2013 Respondent $1,000.00
November 22, 2013 Respondent $1,000.00
December 9, 2013 Metro Bonding $1,500.00
August 1, 2014 Respondent $500.00
TOTAL $12,726.18
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Whether the respondent was authorized to make the payments reflected in this paragraph
is unclear from the record.
"Conclusions of Law
"24. Based upon the findings of fact, the hearing panel concludes as a matter
of law that the respondent violated KRPC 1.8 and KRPC 1.15, as detailed below.
"KRPC 1.8
"25. KRPC 1.8(a) provides:
'(a) 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 to the client in a manner which can be
reasonably understood by the client; and
(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
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transaction, including whether the lawyer is
representing the client in the transaction.'
In this case, the respondent borrowed $10,000 from R.K., agreed to pay R.K. 6% per
annum, and, according to the respondent, executed a promissory note. The respondent
failed to advise R.K. of the desirability of seeking independent counsel. Further, R.K. did
not provide written informed consent, as required by KRPC 1.8(a)(3). As a result, the
hearing panel concludes that the respondent violated KRPC 1.8(a).
"KRPC 1.15
"26. Lawyers must keep the property of their clients safe. See KRPC 1.15. In
pertinent part, that rule provides:
'(a) A lawyer shall hold property of clients or third persons
that is in a lawyer's possession in connection with a representation
separate from the lawyer's own property. Funds shall be kept in a
separate account maintained in the state of Kansas. Other property shall
be identified as such and appropriately safeguarded. Complete records of
such account funds and other property shall be kept by the lawyer and
shall be preserved for a period of five years after termination of the
representation.
'(b) Upon receiving funds or other property in which a client
or third person has an interest, a lawyer shall promptly notify the client
or third person. Except as stated in this Rule or otherwise permitted by
law or by agreement with the client, a lawyer shall promptly deliver to
the client or third person any funds or other property that the client or
third person is entitled to receive and, upon request by the client or third
person, shall promptly render a full accounting regarding such property.
....
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'(d) Preserving identity of funds and property of a client.
(1) All funds of clients paid to a lawyer or
law firm, including advances for costs and expenses,
shall be deposited in one or more identifiable accounts
maintained in the State of Kansas . . .
(2) The lawyer shall:
....
(iii) Maintain complete records of all funds,
securities, and other properties of a
client coming into the possession of the
lawyer and render appropriate
accountings to the client regarding
them.
(iv) Promptly pay or deliver to the client as
requested by a client the funds,
securities, or other properties in the
possession of the lawyer which the
client is entitled to receive.'
The respondent failed to deposit R.K.'s funds into the respondent's trust account, the
respondent failed to maintain complete attorney trust records, and the respondent failed to
promptly return the funds R.K. was entitled to receive. As such, the hearing panel
concludes that the respondent violated KRPC 1.15(a), KRPC 1.15(b), KRPC 1.15(d)(1),
and KRPC 1.15(d)(2), as follows:
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a. In his amended answer, the respondent admitted that he violated KRPC
1.15(a) and KRPC 1.15(d)(1) when he failed to deposit R.K.'s funds into his attorney
trust account. The hearing panel further finds that the respondent violated KRPC 1.15(a)
when he failed to maintain complete attorney trust account records.
b. The respondent violated KRPC 1.15(b) when he failed to promptly
deliver to R.K. the funds R.K. was entitled to receive.
c. Finally, the hearing panel concludes that the respondent violated KRPC
1.15(d)(2) when he failed to maintain complete records of his attorney trust account and
when he failed to promptly return R.K.'s funds which R.K. was entitled to receive.
"American Bar Association
Standards for Imposing Lawyer Sanctions
"27. In making this recommendation for discipline, the hearing panel
considered the factors outlined by the American Bar Association in its Standards for
Imposing Lawyer Sanctions (hereinafter 'Standards'). Pursuant to Standard 3, the factors
to be considered are the duty violated, the lawyer's mental state, the potential or actual
injury caused by the lawyer's misconduct, and the existence of aggravating or mitigating
factors.
"28. Duty Violated. The respondent violated his duty to his client to refrain
from engaging in conflicts of interest and his duty to his client to properly safeguard his
client's property.
"29. Mental State. The respondent knowingly violated his duties.
"30. Injury. As a result of the respondent's misconduct, the respondent caused
R.K. actual injury.
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"31. Aggravating and Mitigating Factors. Aggravating circumstances are any
considerations or factors that may justify an increase in the degree of discipline to be
imposed. In reaching its recommendation for discipline, the hearing panel, in this case,
found the following aggravating factors present:
a. Prior Disciplinary Offenses. On September 12, 2014, the respondent
entered into the attorney diversion program with the disciplinary administrator's office for
having violated KRPC 1.3, KRPC 1.4, and KRPC 8.1. The hearing panel concludes that
the respondent's prior disciplinary offense is particularly aggravating as the respondent
was participating in the attorney diversion program at the time the respondent failed to
pay R.K. the money owed to him.
b. Dishonest or Selfish Motive. The respondent's misconduct was motivated
by selfishness. The respondent borrowed $10,000 from his client and did not repay the
money when asked to do so. Accordingly, the hearing panel concludes that the
respondent's misconduct was motivated by selfishness.
c. A Pattern of Misconduct. The respondent engaged in a pattern of
misconduct when he failed to maintain proper trust account records, when he failed to
repay the money when R.K. asked him to do so, and when he repeatedly failed to deposit
client funds in his attorney trust account.
d. Submission of False Evidence, False Statements, or Other Deceptive
Practices During the Disciplinary Process. At the hearing on the formal complaint, on
many occasions, the respondent attempted to evade directly answering questions. The
respondent was surly and argumentative. Additionally, the respondent was deceptive
during this testimony. The respondent's testimony included the following exchange:
'A. [By the respondent] . . . So that's the position of public
administrator.
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'Q. [By Mr. Smith] And you say you're not doing that at this point in
time?
'A. Well, the judge, Judge Lynch now is – the office was retained
and up to the point in time Judge Lynch has saw fit to spread that
over a number of other people. I'm one of them, but now it's
spread out among other people.
'Q. So it's not that you were removed for any reason, it was just that
he changed the system somewhat?
'A. Judge Lynch, Kathleen Lynch, yeah, she did.'
The respondent's testimony was false. According to the facts included in the diversion
agreement, the respondent's testimony was false. The hearing panel is troubled by the
respondent's attempt at deception through this testimony.
e. Refusal to Acknowledge Wrongful Nature of Conduct. The respondent
refused to acknowledge a portion of his misconduct. The respondent admitted that he did
not properly safeguard R.K.'s property. However, the respondent refused to acknowledge
that he had improperly entered into a business transaction with R.K. Further, the
respondent refused to acknowledge that he failed to maintain proper trust account records
and that he failed to timely return R.K.'s funds to him. Accordingly, the hearing panel
concludes that the respondent refused to acknowledge the wrongful nature of a portion of
his misconduct.
f. Vulnerability of Victim. R.K. was vulnerable to the respondent's
misconduct.
g. Substantial Experience in the Practice of Law. The Kansas Supreme
Court admitted the respondent to practice law in the State of Kansas in 1968. At the time
of the misconduct, the respondent has been practicing law for more than 40 years.
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"32. Mitigating circumstances are any considerations or factors that may
justify a reduction in the degree of discipline to be imposed. In reaching its
recommendation for discipline, the hearing panel, in this case, found no mitigating
circumstances.
"33. In addition to the above-cited factors, the hearing panel has thoroughly
examined and considered the following Standards:
'4.12 Suspension is generally appropriate when a lawyer knows or
should know that he is dealing improperly with client property
and causes injury or potential injury to a client.
'4.32 Suspension is generally appropriate when a lawyer knows of a
conflict of interest and does not fully disclose to a client the
possible effect of that conflict, and causes injury or potential
injury to a client.'
"Recommendation
"34. The disciplinary administrator argued that if the respondent was
negligent when he committed the misconduct then published censure would be
warranted. The disciplinary administrator also argued that if the respondent engaged in
the misconduct knowingly, then a period of suspension was warranted and the hearing
panel must consider whether to recommend that the respondent's plan of probation be
adopted. Finally, the disciplinary administrator did not object to consideration of the
respondent's plan of probation. The disciplinary administrator made recommendations for
additions to the plan of probation.
"35. Despite providing a plan of probation, the respondent recommended that
he be censured by Kansas Supreme Court.
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"36. It is clear from all the evidence presented at the hearing on the formal
complaint that the respondent was not forthright during his testimony. Additionally, the
hearing panel notes that the respondent demonstrated a surly approach and attitude during
the hearing. The respondent failed to appreciate the injury which his misconduct caused
R.K., his client. The factors in aggravation convince the hearing panel that a period of
suspension is warranted.
"37. The hearing panel recommends that the Supreme Court issue an order
suspending the respondent's license for a period of 2 years. The hearing panel further
recommends that after a period of 3 months suspension, that the respondent be placed on
supervised probation for a period of 2 years. The hearing panel concludes, however, that
the respondent's current plan of probation is not substantial and detailed enough to cure
the problems which arose during this case.
"38. Within 30 days of the date of this report, the hearing panel recommends
that the respondent and his counsel provide an amended plan of probation to the
disciplinary administrator which is substantial and detailed [and] addresses the concerns
expressed by Mr. Walczak during the hearing.
"39. The hearing panel recommends that the respondent propose a different
practice supervisor. John L. Peterson supervised the respondent under the attorney
diversion agreement. While the respondent was subject to the supervision in the attorney
diversion agreement, the respondent engaged in the misconduct in this case. The hearing
panel recommends that the new practice supervisor proposed by the respondent be
someone who can also work with the respondent on his trust account issues. The hearing
panel concludes that Lesley Johnson is not aware of the duties and responsibilities of
lawyers with regard to attorney trust accounts and is not an appropriate person to
supervise the respondent regarding attorney trust account issues.
"40. The hearing panel further recommends that the respondent immediately
put the amended plan of probation in effect and continue to comply with the amended
plan of probation.
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"41. Kan. Sup. Ct. R. 211(g)(5) provides:
'Prior to the oral argument before the Supreme Court pursuant to Kan.
Sup. Ct. R. 212, the Respondent shall provide an affidavit to the
Disciplinary Administrator and the Clerk of the Appellate Courts that
states that the Respondent is in compliance with the terms and conditions
of the proposed probation plan. . . .'
The hearing panel recommends that the respondent provide the Court with a copy of his
amended plan of probation at the time he complies with Kan. Sup. Ct. R. 211(g)(5).
"42. Costs are assessed against the respondent in an amount to be certified by
the Office of the Disciplinary Administrator."
ANALYSIS
In a disciplinary proceeding, this court considers the evidence, the findings of the
disciplinary panel, and the arguments of the parties to determine whether violations of the
KRPC exist and, if they do, what discipline should be imposed. Attorney misconduct
must be established by clear and convincing evidence. In re Foster, 292 Kan. 940, 945,
258 P.3d 375 (2011); see Kansas Supreme Court Rule 211(f) (2017 Kan. S. Ct. R. 251).
Clear and convincing evidence is "'evidence that causes the factfinder to believe that "the
truth of the facts asserted is highly probable."'" In re Lober, 288 Kan. 498, 505, 204 P.3d
610 (2009) (quoting In re Dennis, 286 Kan. 708, 725, 188 P.3d 1 [2008]).
The respondent was given adequate notice of the formal complaint, to which he
filed an answer, and respondent was also given adequate notice of the hearing before the
panel and the hearing before this court. The respondent filed exceptions to the hearing
panel's final hearing report. When exceptions are taken to a hearing panel report, "[t]his
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court does not reweigh the evidence or assess the credibility of witnesses. 'Rather, this
court examines any disputed findings of fact and determines whether clear and
convincing evidence supports the panel's findings. If so, the findings will stand.
[Citations omitted.]'" In re Hawkins, 304 Kan. 97, 117-18, 373 P.3d 718 (2016) (quoting
In re Trester, 285 Kan. 404, 408-09, 172 P.3d 31 [2007]); see In re Bishop, 285 Kan.
1097, 1105-06, 179 P.3d 1096 (2008).
Unlike the standard for proving attorney misconduct, the panel does not need clear
and convincing evidence to consider aggravating and mitigating factors when selecting
an appropriate disciplinary option. In re Hall, 304 Kan. 999, 1013, 377 P.3d 1149 (2016).
Nevertheless, some evidence of those circumstances must be presented for weighing.
304 Kan. at 1014.
In applying these standards, we have organized the parties' arguments into three
issues: (1) Does clear and convincing evidence support the hearing panel's finding that
the respondent violated KRPC 1.8(a) (2017 Kan. S. Ct. R. 307) (conflict of interest)?
(2) Does clear and convincing evidence support the panel's finding that the respondent
violated KRPC 1.15 (2017 Kan. S. Ct. R. 326) (safekeeping property)? and (3) What is
the appropriate discipline?
ISSUE 1: Does clear and convincing evidence exist to support the panel's findings that
the respondent violated Rule 1.8(a)?
The hearing panel found that the respondent violated KRPC 1.8(a). The rule,
quoted in full in paragraph 25 of the hearing panel report, prohibits lawyers from entering
into certain business transactions with clients unless the lawyer and client meet certain
conditions. The respondent takes exception to the panel's finding that he violated KRPC
1.8(a), arguing he did not enter into a business transaction with R.K. but merely held
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$10,000 at R.K.'s request. At the panel hearing, R.K. and the respondent presented
conflicting testimony regarding the purpose of the arrangement.
R.K. testified on direct examination that the respondent contacted R.K. and asked
for a loan of $10,000 to buy a bar with two other partners. R.K. agreed and gave $10,000
to the respondent in various cash denominations. He also testified that the respondent
agreed to give R.K. an "I.O.U." as a receipt and that the respondent said he would pay
6 to 8% interest every 4 months, $600 every 4 months, or give R.K. a job. R.K. also
stated at the hearing that the respondent never provided him with documentation.
The respondent testified that R.K. asked the respondent to hold the $10,000, all in
$100 bills, for safekeeping. He indicated that R.K. did not trust banks, his friends, or his
family to hold the money. The respondent agreed to hold the money and also agreed to
pay 6% interest for the period of time he had the money. The respondent admitted to
executing a promissory note when R.K. gave him the $10,000, but at the time of the
hearing the respondent could not find the promissory note. The respondent testified he
executed the promissory note to act as "evidence and proof . . . that I was holding his
money and if he died someone would know about that." When asked why he drafted a
promissory note, rather than a receipt, he stated that he did not "give it much thought at
that point in time."
The record indicates that the respondent paid interest to R.K. After the
Disciplinary Administrator instituted proceedings against the respondent, the respondent
gave R.K. a notarized receipt reflecting that respondent made a payment to R.K. for three
items. First, the respondent transferred $10,000 to R.K. in $100 bills. Second, the
respondent paid $317.42 by check from the respondent's trust account, which was the
"remainder of funds held in trust by him for my legal representation and attendant
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expenses." Third, the respondent paid, by check, "$1,966.81 from the business account of
[the respondent] . . . which amount represents 6% interest accrued on $10,000.00 from
January, 2012 through December 31, 2014."
Based on this evidence, the hearing panel found "the respondent's explanation of
the agreement to pay 6% per annum and the purported promissory note to be
unbelievable." The panel further found that the respondent agreed to pay interest because
"the respondent and R.K. entered into a business transaction."
This finding regarding the existence of a business transaction rests on two facts
about which the respondent testified: (1) He paid interest on the $10,000 and (2) he
documented the arrangement by drafting a promissory note. Nevertheless, the respondent
urges us to set aside the finding on the grounds it is based on a tainted view of his
credibility. The respondent points to a finding made by the hearing panel when discussing
the appropriate discipline to be imposed, namely the panel's finding of an aggravating
factor based upon the "many occasions [where] the respondent attempted to evade
directly answering questions. The respondent was surly and argumentative. Additionally,
the respondent was deceptive during this testimony."
Giving an example of the respondent's deceptive testimony, the panel discussed
testimony related to a diversion agreement the respondent had entered into as the result of
a different disciplinary complaint. In the diversion agreement, the respondent stipulated
that he failed to appear at several court proceedings related to a probate case in which he
served as a public administrator and that the probate judge "unilaterally appointed a new
administrator in April, 2013." Apparently, the panel believed that the respondent had
been removed from serving as a public administrator in all cases because it explicitly
found he gave false testimony during the disciplinary hearing when he indicated that he,
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along with several other attorneys, currently acted as public administrators. The
respondent and the Disciplinary Administrator agree that the panel confused the
respondent's removal as administrator in one case to mean he no longer serves as a public
administrator in any case. The Disciplinary Administrator concedes the respondent's
testimony regarding his continuing service as a public administrator was not false.
Our review of the documentary evidence related to the diversion agreement leads
us to agree that the hearing panel apparently misinterpreted the situation, although it is
understandable how the confusion arose because there is a great deal of ambiguity in the
testimony and evidence. Nevertheless, the panel reached the wrong conclusion about the
respondent's testimony on this one point. See Hall, 304 Kan. at 1014 (hearing panel does
not need clear and convincing evidence to support finding of an aggravating factor but
must have some evidence).
The respondent argues this misunderstanding cannot be compartmentalized so as
to effect only the consideration of aggravating circumstances. Instead, he argues, the
finding taints the panel's assessment of his credibility. He further argues we cannot
conclude that clear and convincing evidence supports the panel's conclusion that he
violated KRPC 1.8(a) because we cannot rely on the panel's credibility determination.
Alternatively, in his brief he suggested we must remand the proceeding to allow the panel
to assess how its misinterpretation of the evidence impacted its weighing of the evidence.
But at oral argument, the respondent withdrew his request for a remand and instead
argued that we must simply disregard any evidence that depended on a credibility
determination. He submitted that once we had done so, there would not be clear and
convincing evidence of a KRPC 1.8(a) violation.
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We can, as respondent suggests, simply examine the evidence about which there is
no dispute and determine if that evidence presents clear and convincing evidence of a
violation. As relevant to the determination of whether the respondent entered into a
business transaction with R.K., we have the respondent's own testimony that he promised
to pay 6% interest, he prepared and executed a promissory note documenting that
agreement, and he did in fact pay interest when he returned the $10,000. While R.K.'s
testimony differs on some points, he also testified that the respondent agreed to provide
interest or other benefits and that the respondent actually paid the interest. The record
also includes a receipt documenting the interest payment. We conclude these
circumstances constitute clear and convincing evidence establishing a violation of
KRPC 1.8(a) and do not require any determination of credibility.
KRPC 1.8(a) prohibits a "business transaction with a client" unless (1) the terms
are fair and reasonable, fully disclosed, and transmitted in writing; (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"; and (3) "the client gives informed consent,
in writing." The respondent does not dispute that these conditions were not met; his
argument focuses solely on whether he entered into a "business transaction" in the first
place. While KRPC 1.8(a) does not define "business transaction," Comment 1 to KRPC
1.8 broadly refers to a "financial transaction with a client" as a type of business
transaction covered by the rule. The respondent tries to limit his "financial transaction" to
a loan by focusing on the dispute about whether R.K. asked the respondent to hold the
$10,000 or the respondent asked to borrow the money to invest in a bar. This limited
focus ignores the language in the Disciplinary Administrator's formal complaint against
the respondent, which alleged that the respondent entered "into a business transaction,
loan arrangement, or similar transaction." (Emphasis added.)
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Regardless of the purpose behind the arrangement, once the respondent agreed to
pay interest for the period of time he held R.K.'s money and executed a promissory note,
he entered into a financial transaction with R.K. and formed a business relationship
outside the course of the respondent's representation of R.K. Certainly, that transaction
had all the indicia of a loan. See Federal Farm Mortgage Corp. v. Bolinger, 152 Kan.
700, 703, 108 P.2d 492 (1940) ("[A] promissory note is the primary evidence of the
indebtedness."); Gregory v. Williams, 106 Kan. 819, 820, 189 P. 932, 933 (1920) ("[t]hat
a promissory note is not in and of itself an indebtedness, but is evidence of such
indebtedness"); Capital Co. v. Merriam, 60 Kan. 397, 401, 56 P. 757, 758 (1899)
("A payment of interest is regarded as an acknowledgement of the debt."); see also Coe,
Administratix v. First National Bank & Trust Co., 219 Kan. 352, 355, 548 P.2d 486(1976) ("A loan is made when the borrower receives money over which he exercises
dominion and which he expressly or impliedly promises to return."). But even if the
respondent and R.K. did not agree on a loan, a transaction in which one party agrees to
pay interest is similar to a loan and falls within the broad meaning of a business
relationship.
Thus, the hearing panel heard clear and convincing evidence of a business
transaction. Accordingly, we accept the hearing panel's findings and conclusions of law
that the respondent violated KRPC 1.8.
ISSUE 2: Does clear and convincing evidence exist to support the panel's findings that
the respondent violated KRPC 1.15?
KRPC 1.15, quoted in pertinent part in paragraph 26 of the hearing panel report,
requires an attorney to safeguard client property by, among other things, keeping the
client's property separate from the lawyer's own property, depositing funds in the lawyer's
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trust account, keeping complete records, and promptly returning and accounting for the
property.
The hearing panel concluded that the respondent violated KRPC 1.15(a) and
KRPC 1.15(d)(1) when he failed to deposit R.K.'s funds into his attorney trust account.
The panel further found that the respondent violated KRPC 1.15(a) when he failed to
maintain complete attorney trust account records. The respondent does not take exception
to these findings. But he does take exception to the panel's finding that he violated KRPC
1.15(b) and 1.15(d)(2)(iv) by failing to promptly return R.K.'s funds.
The respondent argues he first learned of R.K.'s demand for the funds when he
received the disciplinary complaint and asserts that he returned the $10,000 to R.K.
within approximately 6 weeks. He argues this payment was "prompt." The Disciplinary
Administrator counters there is evidence that it took 8 months for the respondent to pay
R.K. after the first demand or, alternatively, that 6 weeks is not prompt.
A determination that the respondent delayed the delivery of the $10,000 for
8 months arguably requires an assessment of credibility. But the respondent's testimony
and the written evidence clearly and convincingly establish a delay of approximately
6 weeks between the complaint and the delivery of the funds. In light of this clear and
convincing evidence, the question becomes whether a 6-week delivery period constituted
a "prompt" delivery of the client's funds.
Neither KRPC 1.15 nor our caselaw provide a clear test for answering that
question. In a past case, this court has found a delay of 10 months to be a violation of
KRPC 1.15. See In re McPherson, 287 Kan. 434, 440, 445-46, 196 P.3d 921 (2008)
(10-month delay in returning retainer after divorce client notified the attorney of the
couple's reconciliation). And certainly, a 6-week delay would be less than the time at
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issue in that case. Nevertheless, KRPC 1.15 directs the lawyer to "promptly deliver" the
property, and "prompt" is defined in this sense to mean: "1. On time: PUNCTUAL.
2. Done without delay." Webster's II New College Dictionary 885 (1995). Whether one
acts on time and without delay will often be determined by the particular circumstances
of a transaction.
Here, as the respondent testified, he was undisputedly obligated to return at least
$10,000 to R.K. Both R.K.'s and the respondent's testimony indicates the respondent was
obligated to return the money on demand. Under those circumstances, the terms "on
time" and "without delay" would mean that the $10,000 should have been returned to
R.K. immediately or, at least, very soon after R.K. made it clear in his November 3, 2014,
complaint filed with the Disciplinary Administrator that he wanted his money returned.
The Disciplinary Administrator's office transmitted the complaint to the respondent via a
letter dated November 6, 2014. On November 26, 2014, the Disciplinary Administrator's
office sent a second letter, noting: "It has now been well over 15 days since that letter
was mailed to you and to date this office has not received a response." The second letter
indicated a formal complaint would be filed unless a response was received within
10 days. On December 5, 2014, the respondent wrote the Disciplinary Administrator's
office and said he would respond by December 12, 2014. Then, on December 17, 2014,
the respondent sent a letter to the office of the Disciplinary Administrator addressing the
complaint. The next day, R.K. signed a receipt acknowledging he had "[i]n hand received
from John P. Biscanin" the $10,000 cash and the two checks, one for funds held in trust
related to the respondent's representation and the other from the respondent's business
account.
The respondent does not dispute that he timely received the November 6 letter or
the November 26 follow up letter. And he readily admits it took him 6 weeks to return the
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money once he had notice of the demand. He explains the delay between notice and
return of funds, claiming that during this time he recovered from his "shock" over the
complaint, had his accountant calculate interest on the $10,000, and assembled
documents for the Disciplinary Administrator. And, indeed, the respondent's response
was lengthy and included 125 pages of attachments. Yet from his first reading of the
complaint the respondent knew he needed to promptly return $10,000, even if his lack of
recordkeeping made it difficult for him to determine what funds he held for R.K. in his
trust account.
An additional circumstance weighs on the assessment of whether respondent
promptly returned the $10,000. On September 12, 2014, just a few weeks before this
current complaint, the respondent had executed the diversion agreement related to the
prior disciplinary complaint against him. As part of that diversion agreement, the
respondent was required to comply with certain terms and conditions for a 12-month
period; those terms included providing information to the Disciplinary Administrator and
cooperating with any investigation by the Disciplinary Administrator's office. We do not
suggest that the respondent's delay in responding to the November 6 and November 26,
2014, letters violated his diversion agreement or provided a separate ground for
discipline. Nevertheless, it weighs heavily in our consideration of whether the respondent
"promptly delivered" the $10,000 to R.K. Given that the ink was barely dry on the
respondent's diversion for an ethical violation, he should have been extremely diligent in
returning at least the $10,000 as quickly as possible. He was not.
The hearing panel determined, based on the above evidence, that the respondent
violated KRPC 1.15(b) and (d)(2). We agree with the panel and conclude that clear and
convincing evidence exists for the hearing panel to conclude that the respondent violated
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those rules by failing to promptly return client funds. Accordingly, we sustain the hearing
panel's findings of fact and conclusions of law.
ISSUE 3: What is the appropriate discipline?
The only remaining issue before us is the appropriate discipline for the
respondent's violations. At the hearing before the panel, the Disciplinary Administrator
suggested that published censure would be appropriate if the panel found the respondent
was negligent. The Disciplinary Administrator further suggested that a period of
suspension was warranted if the panel found the respondent acted knowingly. The
respondent requested published censure, but he presented an alternative plan of
probation.
The hearing panel, in its final hearing report, recommended the respondent's
license be suspended for a period of 2 years and that after a period of 3 months, the
respondent be placed on supervised probation for a period of 2 years. Having concluded
the respondent's proposed plan of probation was not substantial and detailed enough to
cure the problems which arose during this case, the hearing panel recommended that,
within 30 days of the date of the final hearing report, the respondent provide an amended
plan of probation which is substantial, detailed, and addressed the concerns expressed by
the Disciplinary Administrator's office during the hearing, including the naming of a
different proposed supervising attorney, the immediate implementation of the amended
probation plan, the filing of an affidavit with the Disciplinary Administrator and the
Clerk of the Appellate Courts pursuant to Kansas Supreme Court Rule 211(g)(5) (2017
Kan. S. Ct. R. 251), and the filing of his amended plan of probation along with his Rule
211 affidavit.
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The respondent filed his amended plan of probation, which included a different
supervising attorney, and his affidavit indicating the plan had been implemented.
At the hearing before this court, at which the respondent appeared, the
Disciplinary Administrator recommended that respondent be suspended from the practice
of law for 2 years—including a period of actual suspension and 2 years of probation. The
Disciplinary Administrator also recommended an independent audit to determine if the
respondent possesses additional client funds belonging to R.K. The respondent requested
published censure.
The recommendations of the hearing panel and office of the Disciplinary
Administrator are advisory only and do not prevent us from imposing greater or lesser
sanctions. Kansas Supreme Court Rule 212(f) (2017 Kan. S. Ct. R. 255); see In re Holste,
302 Kan. 880, 888, 358 P.3d 850 (2015). A majority of this court rejects the hearing
panel's recommended discipline of 2 years' suspension, with a truncated period of
3-months' suspension and supervised probation for a period of 2 years. While we
unanimously agree on the appropriateness of a 2-year suspension with some portion
being stayed while the respondent serves a 2-year period of probation, a majority of the
court would require the respondent to serve a 6-month suspension before the stay.
Additionally, we agree with the Disciplinary Administrator's office that an
independent audit of the respondent's client trust account is appropriate in this case.
Accordingly, the respondent is ordered to file an amended probation plan with the
Disciplinary Administrator before the start of his probation period, which shall include a
provision for an independent audit to assess whether the respondent still possesses client
funds belonging to R.K. The respondent shall also comply with Kansas Supreme Court
Rule 218 (2017 Kan. S. Ct. R. 262). Before reinstatement is allowed, the respondent shall
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comply with Rule 219(b) (2017 Kan. S. Ct. R. 263) (verified petition for reinstatement).
A reinstatement hearing shall not be required.
CONCLUSION AND DISCIPLINE
IT IS THEREFORE ORDERED that JOHN P. BISCANIN be and he is hereby disciplined
by suspension for a period of 2 years in accordance with Kansas Supreme Court Rule
203(a)(2) (2017 Kan. S. Ct. R. 234).
IT IS FURTHER ORDERED that the above suspension be stayed after 6 months, at
which time the respondent will be placed on supervised probation for a period of 2 years.
IT IS FURTHER ORDERED that the respondent file an amended proposed probation
plan prior to the start of his probation period with the Disciplinary Administrator's office,
including a provision providing for an independent audit to assess the amount of client
funds, if any, the respondent still possesses that belong to R.K. The provisions of Kansas
Supreme Court Rule 211(g)(6)-(12) (2017 Kan. S. Ct. R. 251) apply.
IT IS FURTHER ORDERED that, prior to the termination of probation, respondent file
a verified petition for reinstatement pursuant to Kansas Supreme Court Rule 219(b) in
which the respondent shall establish compliance with the requirements set out above,
including Kansas Supreme Court Rule 218. A reinstatement hearing shall not be required,
and reinstatement may occur under the provisions of Kansas Supreme Court Rule
219(c)(1).
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IT IS FURTHER ORDERED that the costs of these proceedings be assessed to the
respondent and that this opinion be published in the official Kansas Reports.
BEIER and BILES, JJ., not participating.
KEVIN P. MORIARTY, District Judge, assigned.1
WILLIAM S. WOOLLEY, District Judge, assigned.2
1
REPORTER'S NOTE: District Judge Moriarty was appointed to hear case
No. 115,002 vice Justice Beier under the authority vested in the Supreme Court by art. 3,
§ 6(f) of the Kansas Constitution.
2
REPORTER'S NOTE: District Judge Woolley was appointed to hear case
No. 115,002 vice Justice Biles under the authority vested in the Supreme Court by art. 3,
§ 6(f) of the Kansas Constitution.
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