Office of Disciplinary Counsel v. Castroverde

Summary

The Supreme Court of Hawaiʻi ordered Lance Castroverde disbarred for multiple violations of the Hawaiʻi Rules of Professional Conduct arising from conflicts of interest, misappropriation of client funds, unreasonable fees, mishandling of escrow funds, improper loans, false notations, and failures during disciplinary investigation. The court also imposed conditions on any future reinstatement, including repayment of misappropriated funds, trust-account training, passage of the Hawaiʻi bar examination, and payment of proceeding costs.

Holdings

1. Castroverde violated HRPC Rule 1.7(a) by representing both sellers and buyers in the home-sale transaction, the related Collection and Holding Agreement, and its administration, where the parties' interests were directly adverse and he did not obtain the required consent after consultation.
2. Castroverde violated HRPC Rule 1.7(b) by representing the buyers and sellers when the representation was adversely affected by his preexisting relationship and responsibilities to the mortgage broker, who was also his client and with whom he had personal lending dealings.
3. Castroverde violated HRPC Rule 1.15(c) by removing and using buyers' funds and loan proceeds held in his client trust account to which he was not entitled.
4. Castroverde violated HRPC Rule 1.5(a) by charging unreasonable fees for arranging and administering the transaction and escrow.
5. Castroverde violated HRPC Rule 1.15(f)(3) by failing to provide the periodic and annual reports required by the Collection and Holding Agreement and by failing to timely account to the parties for trust and escrow funds.
6. Castroverde violated HRPC Rule 1.1 by failing to record the Agreement of Sale when recording was necessary to protect the buyers' rights and interests, and violated HRPC Rules 1.2(d), 4.1(b), and 8.4(c) by facilitating a mortgage obtained under false pretenses and failing to disclose the agreement to the new mortgagee.
7. Castroverde violated HRPC Rules 1.2(d) and 8.4(c) by issuing checks to sellers that falsely characterized buyer-funded interest payments as interest on a loan from the Castroverde Family Trust.
8. Castroverde violated HRPC Rule 1.8(a) by entering into the $50,000 and $61,000 loan transactions with client-sellers without fair and reasonable terms, adequate written disclosure, a reasonable opportunity for independent legal advice, and written consent to the conflicts.
9. Castroverde violated HRPC Rules 8.1(b), 8.4(d), 1.15(g)(2), and 1.15(g)(9) by failing to provide requested disciplinary documents and failing to maintain required client-fund ledgers and quarterly trust-account listings for six years.
10. Disbarment was warranted because Castroverde's knowing and intentional misconduct involved misappropriation, dishonesty, multiple offenses, substantial experience, selfish motive, obstruction, refusal to acknowledge wrongdoing, and indifference to restitution.

Questions Presented

1. Whether the record established by clear and convincing evidence that Castroverde violated the Hawaiʻi Rules of Professional Conduct through conflicts of interest, mishandling and misappropriation of client funds, unreasonable fees, incompetent representation, dishonesty, improper business transactions with clients, and obstruction of the disciplinary investigation.
2. Whether the proven misconduct warranted disbarment under the applicable disciplinary standards.
3. What conditions should govern any future petition for reinstatement.

Disposition

other