No. 2016-8
Order (public reprimand) entered by the Board on July 11, 2016.
SUMMARY1
As set forth below, the respondent received a public reprimand for falsely witnessing and notarizing a forged signature on certain legal instruments and for failing to communicate adequately with his clients once the forgery was brought to his attention.
The respondent represents individuals seeking to issue private short-term, interest-bearing loans to qualified borrowers. In early 2008, the respondent was authorized by a group of these lender-clients to issue a $1.2 million loan to a prospective borrower. The borrower said that he and his wife would secure the loan with a joint mortgage on their marital home. The respondent accordingly prepared a promissory note and mortgage for the couple to sign.
On the day of the closing, the husband arrived alone at the respondent’s office. He explained that his wife was unable to attend the closing but that he had her legal authority under a power of attorney on record at the Registry of Deeds. The husband represented that he had therefore signed both his own and his wife’s names to the instruments. Relying on this representation, the respondent witnessed both signatures on the promissory note and the mortgage. He also notarized their signatures on the mortgage, falsely stating that both the husband and the wife had appeared personally before him and acknowledged that their signatures were made voluntarily for the stated purpose.
Following the closing, the respondent instructed his associate to record the $1.2 million mortgage at the Registry of Deeds. He also asked the associate to confirm that there indeed was a power of attorney on record giving the husband the legal authority to act on his wife’s behalf. However, the associate failed to confirm that there was a power of attorney and, in fact, there was none. The respondent was unaware of this fact.
After the first mortgage was recorded, the husband approached the respondent to borrow another $1.2 million against the marital home. With the approval of his lender-clients, the respondent prepared another promissory note, along with a mortgage, for the couple to sign. At the closing, the husband again appeared without his wife and proceeded to sign both his own and his wife’s names to the instruments. Relying on his misunderstanding that the power of attorney had been confirmed by his associate, the respondent witnessed and notarized the signatures. Following the closing, the second $1.2 million mortgage was recorded at the Registry of Deeds.
At the end of 2008, the husband approached the respondent for purposes of obtaining another loan. On this occasion, the respondent referred the loan to a new lender, who agreed to issue a home mortgage loan in the amount of $300,000. The respondent prepared the promissory note and corresponding home mortgage for the couple to sign. As before, only the husband appeared at the closing. Based on his continued misunderstanding that there was a power of attorney on record, the respondent witnessed and notarized the signatures of both the husband and the wife. After the closing, the $300,000 mortgage was recorded at the Registry of Deeds.
In 2012, the wife filed for divorce from the husband. By this time, she had discovered that her husband had borrowed $2.7 million against the marital home without her knowledge. Although the husband had been paying down the loans without incident or default, the wife was upset that her soon-to-be ex-husband had encumbered their home. The husband then informed the respondent -- for the first time -- that he had lied to him about the existence of a power of attorney. With this new information, the respondent decided that it was best to discharge the above mortgages. His plan was to eliminate the faulty security interests but keep the husband personally obligated to pay back the loans. The respondent failed to consult with his lender-clients about this plan or any alternatives. It was the respondent’s belief at the time that he had the lenders’ authority to act on their behalf in all matters relating to the mortgages.
The respondent subsequently arranged for the discharge of the mortgages. Afterwards, in connection with the divorce proceeding, the husband entered an agreement accepting sole responsibility for repayment of the three loans which remained outstanding. The husband continued to pay down the three loans without incident or default.
The respondent thus engaged in the following professional misconduct. First, by failing to confirm that there was a valid power of attorney on record, the respondent violated Mass. R. Prof. C. 1.1 and 1.3. Second, by notarizing and purporting to witness the signature of a person who was not before him, the respondent violated Mass. R. Prof. C. 8.4(c). Lastly, by arranging for the discharge of the mortgages on the home without first consulting with his lender-clients about his intended corrective actions, the respondent violated Mass. R. Prof. C. 1.4.
The respondent’s misconduct was mitigated by the fact that the lender-clients who were owed money under the loans at issue acknowledge that the respondent had full authority to discharge the mortgages. They also ratified the discharges after-the-fact.
On April 26, 2016, the parties submitted a stipulation to the board in which the respondent admitted the truth of the above facts and stipulated to the above rule violations. The parties recommended that the respondent receive a public reprimand. On June 13, 2016, the board accepted the parties’ recommendation.
1 Compiled by the Board of Bar Overseers based on the record of proceedings before the board.