State v. Callahan

Brief Fact Summary. Respondent represented both parties in a real estate transaction and purposely drafted the sale agreement to favor the buyer, a long-time client. Neither this provision nor the pre-existing relationship was disclosed to the seller.

Synopsis of Rule of Law. An attorney must fully disclose all potential conflicts of interest to both parties.

Facts. Respondent, attorney John Callahan, was acting as personal attorney to Lowell Lygrisse. Lygrisse was looking to buy land owned by California resident Ruth Fulton, and suggested to her that Respondent handle the transaction for both of them. She agreed, and Respondent successfully drew the appropriate papers (including a very unusual arrangement that included an unsecured, interest-free loan as part of the purchase price that Fulton did not fully understand) and closed the sale as per prearranged terms. When Lygrisse defaulted on the final payment, Fulton came to the Respondent for advice. Respondent repeatedly advised Fulton that Lygrisse would pay. When he did not, she retained separate counsel for a malpractice action against Respondent once it became clear that the sale agreement had given them no security interest in the property. Respondent argues that he was merely acting as a “scrivener” for the two parties, and that he had no obligation to suggest “better terms” than t
hose provided by Lygrisse.

Issue. Was Respondent’s conduct proper here?

Held. No. Respondent’s failure to disclose his prior relationship with Lygrisse, as well as his conduct regarding the drafting of the land sale contract, “clearly rises to the level of deceit and dishonesty.” Discipline is appropriate here.

Discussion. Although providing full disclosure to both parties can sometimes be very difficult, this was a case in which there was an absolutely unquestionable duty to do so. Also, should Callahan have ever agreed to this arrangement (in which he was effectively representing both sides of a real estate transaction) in the first place? The court hardly addresses this question.