In the Matter of Lester W. Firstenberger

MEMORANDUM AND ORDER

The Board of Bar Overseers (board) filed an information recommending that the respondent be suspended from the practice of law for six months and one day. The board adopted the report of an appeal panel, which found that the respondent violated Mass. R. Prof. C. 8.4 (c) (conduct involving dishonesty, fraud, deceit, or misrepresentation) and 8.4 (h) (conduct that adversely reflects on fitness to practice law).

The appeal panel's findings and conclusions are summarized as follows. The respondent had given a first mortgage to Bank of America, and a second mortgage to Mortgage Lenders Network, Inc. (MLN), on his residence. At the time he gave the second mortgage to MLN, in December, 1998, the respondent was employed as its vice president and general counsel, positions he held until April, 2000. He later refinanced his mortgage with Bank of America, but in order to keep the bank in first position, he arranged with MLN to discharge its mortgage and then record a new second mortgage. On April 27, 1999, MLN's president executed a discharge of its mortgage and the respondent executed a new second mortgage to MLN. He took both instruments pursuant to an oral agreement with MLN's president that he would record the second mortgage after his refinance with Bank of America to secure for MLN the same position it had held prior to the execution of the discharge, namely, that of second mortgagee.

The respondent recorded the discharge on May 4, 1999. On May 18, 1999, he refinanced his loan with Bank of America. He never recorded the MLN mortgage, as he had agreed. He subsequently gave mortgages to his father and his father-in-law. By June, 2001, the respondent was in default on his mortgage loans to Bank of America and MLN. MLN began preparations to foreclose and learned for the first time that the respondent had not recorded its mortgage.

On October 29, 2001, Bank of America sold the respondent's home at a foreclosure sale. The surplus proceeds, $49,810.58, became the subject of an interpleader action, of which MLN was a party. The parties to that action entered into a settlement agreement, which provided that MLN would receive $40,310.58 from the surplus funds, plus a promissory note from the respondent in the amount of $76,989.22 for a term of three years at an annual interest rate of 10.88%.²

The appeal panel found that the respondent acted deceitfully, dishonestly, and fraudulently when he gave mortgages to his father-in-law and to his father k cowing that MLN's mortgage was unrecorded, and, thereby "knowingly undermined the priority of MLN's security,"³ in violation of rules 8.4 (c) and 8.4(h).

The respondent argues that the conclusion he "knowingly undermined the priority of MLNs security" deprives him of due process because it is a theory on which discipline rests for which he received no notice. There is no merit to this claim. The phrase "knowingly undermined the priority of MLN's security" is merely an elegant way of saying that, by allowing the mortgages to his father-in-law and his father to be recorded with knowledge that MLN's mortgage had not been recorded, the respondent knowingly breached his agreement to preserve MLN's status as a second mortgagee.

Bar counsel set forth the factual basis for this theory at paragraphs 12 through 18 of its petition for discipline. The only essential fact on this issue disputed by the respondent in his answer to bar counsel's petition was the alleged agreement to record the new second mortgage, which was one of the most, if not the most, hotly contested issue at the hearing. The respondent denied the existence of the agreement. The hearing committee disbelieved the respondent's testimony on the matter, and credited the testimony of the president of MLN that the respondent agreed to record the new mortgage to preserve MLN's position as second mortgagee. Credibility determinations are for the finder of fact, Matter of Saab, 406 Mass. 315, 328 (1989), and will not be rejected unless it can be "'said with certainty' that [a] finding was 'wholly inconsistent with another implicit finding.' Matter of Barrett, 447 Mass. 453, 460 (2006), quoting Matter of Hachey, 11 Mass. Att'y Disc. R. 102, 103 (1995).

The respondent's assertion that he had no duty to record MLNs mortgage is belied by the finding of the appeal panel that he agreed to record the mortgage. The duty arose from the agreement. The appeal panel found that the only reason MLN discharged its mortgage was to accommodate the respondent, its senior vice president and general counsel. Tellingly, in his answer to the petition for discipline, the respondent states that MLN's president had inquired why the respondent's mortgage broker did not want MLN to subordinate MLN's mortgage to the new Bank of America mortgage (the more conventional procedure to preserve MLN's position), to which the respondent replied he did not know but assumed the broker had a reason.

Finally, the respondent argues that MLN's position as second mortgagee was protected by the doctrine of equitable subordination, and therefore MLN could not have lost its position as second mortgagee. See East Boston Savs. Bank v. Ogan, 428 Mass. 327 (1998). The board addressed this argument and noted that in the absence of any evidence that the respondent's father-in-law and his father knew of MLN's second mortgage, the doctrine of equitable subrogation would not apply. Id. at 328¬329 & n.2. Moreover, the argument ignores the finding of the appeal panel that the respondent agreed to record the mortgage to preserve MLN's position as second mortgagee. MLN did not bargain to have the respondent tell all subsequent mortgagees that MLN had a prior mortgage so it could sue to establish its priority. It bargained to have its priority established as a matter of record.

I am satisfied that the findings and conclusions of the appeal panel, adopted by the board, are supported by substantial evidence. I also am satisfied that the sanction of six months and one day, recommended by the board, is a comparable sanction for similar cases. See Matter of Alter, 389 Mass. 153, 156 (1983). The recommendation of the board "is entitled to substantial deference." Matter of Tobin, 417 Mass. 81, 88 (1994).

The respondent is ordered suspended from the practice of law for a term of six months and one day. His reinstatement is conditioned on his passing the Multi-State Professional Responsibility Examination.

FOOTNOTES:

¹ The complete Order of the Court is available by contacting the Clerk of the Supreme Judicial Court for Suffolk County.

² The terms of the note are not set forth in the appeal panel report, but are found in the hearing committee report. The appeal panel implicitly adopted the findings of the hearing committee when it recommended that the board adopt the findings and conclusions of the hearing committee. According to the hearing committee report, the respondent also made fourteen monthly payments on the note but made no further payments as of the date of the hearing, i.e., May 4, 2004.

³ The quoted phrase was first penned by the hearing committee.

Related to No. BD-2007-0014

• S.J.C. Judgment of Reinstatement entered by Justice Spina, 11/19/2007