Electronically Filed
Supreme Court
SCAD-16-0000037
21-APR-2016
01:21 PM
SCAD-16-0000037
IN THE SUPREME COURT OF THE STATE OF HAWAI#I
OFFICE OF DISCIPLINARY COUNSEL,
Petitioner,
vs.
LANCE CASTROVERDE,
Respondent.
ORIGINAL PROCEEDING
(ODC CASE NO. 14-003-9146)
ORDER OF DISBARMENT
(By: Recktenwald, C.J., Nakayama, Pollack, and Wilson, JJ.,
and Intermediate Court of Appeals Associate Judge Ginoza,
in place of McKenna, J., recused)
Upon consideration of the January 21, 2016 report
submitted to this court by the Disciplinary Board of the Supreme
Court of the State of Hawai#i and the record, we find and
conclude, by clear and convincing evidence, that the record
supports the Board’s Findings of Fact, with the exception that we
find a portion of the Board’s Finding of Fact No. 17 is clearly
erroneous, insofar as a review of the record demonstrates
Respondent Lance Castroverde included the notation “CFT Loan” on
the relevant checks, not “ACFT Loan” as found by the Board. See
Dockets 1:12, 3:298, 302, 306-07, 309, 311, 327, 329, 336-37,
343-44, 347, 368, 371.
We conclude by clear and convincing evidence that
Respondent Castroverde violated the following provisions of the
Hawai#i Rules of Professional Conduct (HRPC) (1994) through the
following conduct:
Respondent Castroverde engaged in prohibited conflicts
of interest with multiple clients, representing three separate
violations of HRPC Rule 1.7(a), by representing both the sellers
and the buyers of the home at 722 Lalani Circle, in Wailuku,
Maui, including by drafting and overseeing the execution of the
Agreement of Sale, where the interests of the parties were
directly adverse to each other and it was not reasonable for
Respondent Castroverde to believe the representation of each
party would not adversely affect his relationship with the other
party and where, even if such a belief were reasonable, he did
not obtain the consent of the parties after consultation; again
by engaging in the same conduct in drafting and executing the
“Collection Agreement and Holding Agreement for Agreement of
Sale” (hereinafter, the “Collection and Holding Agreement”); and
again by overseeing the administration of the Collection and
Holding agreement.
We conclude Respondent Castroverde violated HRPC Rule
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1.7(b) by representing the sellers and the buyers as a result of
an introduction by the Principal at TLI, a mortgage broker, when
it was unreasonable to believe the representations would not be
adversely affected by Respondent Castroverde’s pre-existing
relationship with, and responsibilities to, the Principal of TLI,
who was Respondent Castroverde’s client and with whom Respondent
Castroverde was involved in the personal lending of funds, and
where Respondent Castroverde did not obtain the consent of the
sellers or the buyers after consultation, even if it had been
reasonable to believe there would be no adverse effect.
We conclude Respondent Castroverde misappropriated
client funds, in violation of HRPC Rule 1.15(c), by removing from
his client trust account, between November 30, 2007 and December
18, 2007, at least $6,258.91 of the buyers’ funds to which he was
not entitled, removing between December 18, 2007 and January 25,
2008 at least $12,912.91 of the buyers’ funds to which he was not
entitled, removing from his client trust account, by a December
3, 2007 check, the “base collection fee portion of the Initial
Reserve” (being account fees for 12 months, at $104.17 per month)
and the “account costs portion of the Initial Reserve” (being
account costs for 12 months, of $5.00 per month), in violation of
the aforementioned Collection and Holding Agreement, which
required those funds to be held in trust as a reserve.
We conclude Respondent Castroverde violated HRPC Rule
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1.5(a) by charging an unreasonable fee as follows: Pursuant to
HRS § 449-3 (1996), Respondent Castroverde, as an attorney, was
exempt from the regulation of escrow deposits if he did not
charge an escrow fee. However, we find Respondent Castroverde
did charge an escrow fee, as the buyers paid Respondent
Castroverde $10,625.00 to arrange the transaction and escrow, and
paid monthly charges of $104.17 and $5.00 to administer the
escrow. By charging said fee, Respondent Castroverde was
obligated to comply with the requirements of HRS Ch. 449 and, as
he did not comply with those requirements and therefore could not
justify the escrow fees he charged, those fees were unreasonable,
in violation of HRPC Rule 1.5(a).
In the Collection and Holding Agreement, Respondent
Castroverde agreed to provide both parties periodic reports when
appropriate, including an annual report, but did not, and,
therefore, did not timely render accounts to any of the parties
concerning the funds held in trust, in escrow, in violation of
HRPC Rule 1.15(f)(3).
Respondent Castroverde did not record the Agreement of
Sale with the Bureau of Conveyances, which was necessary to
protect the rights and interests of the buyers, conduct which we
conclude rises to the level of incompetence, in violation of HRPC
Rule 1.1.
In addition, we conclude Respondent Castroverde’s
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failure to record the Agreement of Sale with the Bureau of
Conveyances assisted his client in successfully obtaining,
through the Principal at TLI, a mortgage on the property under
false pretenses, in violation of HRPC Rules 1.2(d) and 8.4(c),
and that Respondent Castroverde failed to otherwise disclose the
Agreement of Sale to the new mortgagee, thereby violating HRPC
Rule 4.1(b). We note Respondent Castroverde specifically
referenced the potential for said mortgage in the Agreement of
Sale which he drafted for the parties.
As required by the Collection and Holding Agreement,
Respondent Castroverde provided the sellers with interest
payments from funds paid by the buyers to Respondent Castroverde,
but Respondent Castroverde’s checks to the sellers characterized
the funds as interest on a loan from a Castroverde Family Trust,
a false notation requested by the sellers in order to meet income
requirements to obtain a loan concerning other property in
Wailuku. By placing the false notations on the checks provided
by him to the sellers, Respondent Castroverde violated HRPC Rules
1.2(d) and 8.4(c).
With regard to a loan from the sellers to Respondent
Castroverde of the $50,000.00 down payment held in Respondent
Castroverde’s client trust account, Respondent Castroverde
violated HRPC Rule 1.8(a) by engaging in a business transaction
with the sellers where the transaction and terms on which
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Respondent Castroverde acquired an interest were not fair or
reasonable to the sellers, where the loan was made without giving
the sellers a reasonable opportunity to seek the advice of
independent counsel regarding the transaction, and where
Respondent Castroverde did not obtain from his clients, the
sellers, written consent to the inherent conflicts.
By misappropriating all but, at most, $5.17 of the
$50,000.00 for his use and benefit, Castroverde violated HRPC
Rule 1.15(c).
With regard to a separate $61,000.00 loan made by one
of the sellers to Respondent Castroverde, Respondent Castroverde
violated HRPC Rule 1.8(a) by entering into the $61,000.00 loan
transaction with his client, the seller, where the transaction
and its terms were not fair and reasonable to the seller, where
Respondent Castroverde did not fully disclose in writing to the
client the transaction or its terms, and did not provide the
client with a reasonable opportunity to consult independent
counsel concerning the transaction.
By misappropriating all but, at most, $5.17 of the
borrowed $61,000.00, Respondent Castroverde violated HRPC Rule
1.15(c).
Finally, with regard to the documents requested by the
Office of Disciplinary Counsel (ODC) in its investigation of the
above conduct, and not subsequently provided by Respondent
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Castroverde, we conclude that Respondent Castroverde violated
HRPC Rules 8.1(b) and 8.4(d) by failing to provide upon request
(1) a copy of the Castroverde Family Trust, (2) checks from a
Castroverde Family Trust account and related deposit slips which
demonstrate transfers from the trust to Respondent Castroverde’s
client trust account were made to pay the interest on the two
loans discussed above, (3) subsidiary ledgers for client funds
during the relevant period, and (4) quarterly lists of all client
funds held in trust, the grand total of which agreed with the
reconciled balance of Respondent Castroverde’s client trust
account.
We conclude that, by failing to maintain subsidiary
ledgers for client funds for six years after the employment to
which they related, Respondent Castroverde violated HRPC Rule
1.15(g)(2) and that, by failing to maintain for six years after
the representation to which they related the quarterly listings
of his client trust accounts, the grand total of which agreed
with his reconciled client trust account, Respondent Castroverde
violated HRPC Rule 1.15(g)(9).
We adopt the Board’s recommended aggravating and
mitigating factors with two exceptions. We find Respondent
Castroverde had substantial experience in the practice of law,
acted with a dishonest or selfish motive, in a pattern of
misconduct in which he committed multiple offenses. He engaged
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in bad faith obstruction of the disciplinary process by avoiding
service of process, refused to acknowledge the wrongful nature of
his conduct, and is indifferent to making restitution. However,
insofar as this court has found violations of HRPC Rules 8.1(b)
and 8.4(d), we decline to adopt ABA Standard 9.22(e) in
aggravation and, insofar as ODC did not successfully establish,
clearly and convincingly, that Respondent Castroverde knew the
falsity of the promises made to provide documentation at the time
he made the relevant statements, we decline to adopt ABA Standard
9.22(f) in aggravation.
We concur with the Board that Respondent Castroverde’s
conduct was knowing and intentional and, under Standard 4.11 of
the American Bar Association’s Standards for Lawyer Discipline,
his conduct warrants disbarment. We adopt the conditions
recommended by the Board to be placed upon any future
reinstatement sought by Respondent Castroverde. Therefore,
IT IS HEREBY ORDERED that Respondent Lance Castroverde
is disbarred from the practice of law in this jurisdiction,
effective 30 days after the date of entry of this order, pursuant
to Rule 2.16(c) of the Rules of the Supreme Court of the State of
Hawai#i (RSCH).
IT IS FURTHER ORDERED that Respondent Castroverde
shall, in accordance with RSCH Rule 2.16(d), file with this court
within 10 days after the effective date of his disbarment, an
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affidavit showing compliance with RSCH Rule 2.16(d) and this
order.
IT IS FURTHER ORDERED that, as a condition of any
future reinstatement of his license to practice law in this
jurisdiction, in addition to any other requirement imposed by
RSCH Rule 2.17, Respondent Castroverde shall repay all
misappropriated funds as detailed in the Findings of Fact and
Conclusions of Law in this matter, shall complete training in the
proper handling of client funds as set forth in the Hawai#i Rules
of Professional Conduct and the Hawai#i Rules Governing Trust
Accounting, shall take and pass the Hawai#i bar examination, and
shall submit proof of the foregoing appended to any petition for
reinstatement.
IT IS FINALLY ORDERED that Respondent Castroverde shall
pay all costs of these proceedings as approved upon the timely
submission of a bill of costs and an opportunity to respond
thereto, as prescribed by RSCH Rule 2.3(c).
DATED: Honolulu, Hawai#i, April 21, 2016.
/s/ Mark E. Recktenwald
/s/ Paula A. Nakayama
/s/ Richard W. Pollack
/s/ Michael D. Wilson
/s/ Lisa M. Ginoza
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