Thursday, May 26, 2016

Arkansas Homebuyer-Couple Tags Closing Attorney w/ Lawsuit Accusing Him Of Failing To Pay Off Existing Mortgage Out Of Closing Proceeds, Leaving Them Facing Foreclosure; Arkansas Supremes Recently Placed Defendant On Interim Suspension For Presently Posing Substantial Threat Of Serious Harm To Public Or Client

In Hope, Arkansas, HopePrescott.com reports:
  • The American dream of owning a home turned into a nightmare for one Hope couple, allegedly caused by Attorney James Pilkinton, according to a lawsuit filed with the Hempstead County Circuit Clerk.

    Plaintiffs Martin Gonzales and Rocio Moreno of Hope did everything right – they worked hard and they saved their money, planning to purchase their first home. Once they had a down payment, they found the house they loved, found a lender and began the process to purchase it.
    ***
    Pilkinton served as closing attorney for the sale. His role was to collect the money from Mr. Gonzales and Mrs. Moreno, prepare and file the necessary documents, distribute the money to Chase to pay off the mortgage and disburse the rest to the Sellers. The Plaintiffs included documents prepared by Mr. Pilkinton from August 2013 stating that the existing Chase mortgage was paid in full by Mr. Pilkinton in August 2013.

    Nothing more was heard of it until October 2, 2015 when Carrington Mortgage Services, LLC (who acquired the mortgage on the property from JPMorgan Chase Bank) filed a Trustees Notice of Default and Intention to Sell, essentially a notice of foreclosure auction, against the house that Mr. Gonzales and Mrs. Moreno had purchased two years earlier. Carrington Mortgage Services claims that the mortgage of almost $50,000.00 was never paid off in August 2013.

    Mr. Gonzales and Mrs. Moreno had been led to believe, based on documents from Pilkinton, that he had paid the mortgage in full, as he was required to do in his role as closing attorney.

    On December 2, 2015, one week before the auction was to be held, Mr. Gonzales and Mrs. Moreno filed a lawsuit against Pilkinton alleging any and all causes of action against Pilkinton, including breech of contract and fraud.

    The lawsuit sought a preliminary injunction to stop the foreclosure sale until the Court can properly examine and rule on the circumstances of the transaction. Circuit Judge Duncan Culpepper granted that request and issued a Temporary Restraining Order to postpone the foreclosure auction.

    All local judges have recused on this case and the Supreme Court of Arkansas assigned retired Circuit Judge Ted Capeheart, formerly of Ashdown, to hear the case.

    Since the filing of the lawsuit, the Sellers have filed a Cross-Complaint against Pilkinton alleging that he was directed to pay off the mortgage and failed to do so. Pilkinton has filed an Answer to the lawsuit denying almost all of the allegations by the Plaintiffs and the Sellers.

    After the filing of Pilkinton’s Answer, the Plaintiffs sent discovery requests to Pilkinton, formal requests for him to answer questions and produce documents, as provided by Arkansas law. The Plaintiffs has since filed a Motion to Compel Plaintiffs First Set of Discovery to Pilkinton, alleging that he refuses to comply with discovery procedures. Pilkinton did not file a response to the discovery in the time limits allowed by law, and as of May 13, 2016, he had not responded to the discovery requests at all.

    As previously reported by HopePrescott.com, Pilkinton’s law license was placed under interim suspension by the Arkansas Supreme Court on March 28, 2016, as he ‘presently pos[ed] a substantial threat of serious harm to the public or his client’.(1)(2)
For the story, see Civil Court Case Filed Against Local Attorney James Pilkinton.

See, generally, Frederick Miller, "If You Can't Trust Your Lawyer .... ?", 138 Univ. of Pennsylvania Law Rev. 785 (1990) for more on the apparent, long-standing tolerance for deceit by many in the legal profession:
  • This tolerance to deception is encouraged by the profession's institutional civility. Seldom is a fig called a fig, or a shyster a shyster. No, our euphemisms are wonderfully polite: "frivolous conduct," or a "lack of candor;" or "law-office failure;" or, heaven forbid, a "peculation," a "defalcation," or a "negative balance" in a law firms's trust account.

    There is also widespread reluctance on the part of lawyers --- again, some lawyers --- to discuss publicly, much less acknowledge, that they have colleagues who engage in deceit and unprofessional conduct.

    This reluctance is magnified when the brand of deceit involves the theft of client money and property, notwithstanding that most lawyers would agree that stealing from clients is the ultimate ethical transgression.[...] The fact is, however, that theft of client property is not an insignificant or isolated problem within the legal profession. Indeed, it is a hounding phenomenon nationwide, and probably the principal reason why most lawyers nationwide are disbarred from the practice of law.
---------------------------
(1) See In re: James H. Pilkinton, Jr. - Order of Interim Suspension (March 28, 2016).

(2) The Arkansas Client Security Fund manages and distributes money collected from annual dues paid by members of the state bar to members of the public who have sustained a financial loss caused by the dishonest conduct of a member of the Arkansas bar acting in an attorney-client relationship or as a fiduciary between the lawyer and claimant. Go here for the rules of the Fund. A reimbursable claim is limited to $40,000.

Unlike most of the other attorney ripoff reimbursement funds, it appears that the Arkansas Fund, whether by design or inadvertence, doesn't seem to make much information available to the public about how to file a claim, or about itself, generally, on its website in a consumer-friendly way. In fact, the Arkansas Supreme Court has once observed that "The Arkansas Bar Association and some individual members of the Bar of Arkansas have suggested that the Fund is under-utilized because of lack of public information about the Fund." See In The Matter Of Client Security Fund, 858 S.W.2d 670 (Ark. 1993).

For those victims of thieving Arkansas attorneys desirous of filing a claim, you'll have to get the information the old-fashioned way: by contacting the office of the Clerk of the Arkansas Supreme Court and asking them to send whatever information they can provide, or at least direct you to the appropriate person or office. Good luck!

For similar "attorney ripoff reimbursement funds" that attempt to clean up the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:
Maps available courtesy of The National Client Protection Organization, Inc.

See generally:
  • N.Y. fund for cheated clients wants thieving lawyers disbarred, a July, 2015 Associated Press story on this Fund reporting that the Fund's executive director, among other things, is calling for prompt referral to the local district attorney when the disciplinary committee has uncontested evidence of theft by a lawyer injuring a client or an admission of culpability;

    When Lawyers Steal the Escrow, a June, 2005 New York Times story describing some cases of client reimbursements ("With real estate business surging and down-payment amounts rising with home prices, the temptation for a lawyer to filch money from a bulging escrow account and later repay it with other clients' money has never been greater, said lawyers who monitor the thefts."),

    Thieving Lawyers Draining Client Security Funds, a December, 1991 New York Times story that gives some-real life examples of how client security funds deal with claims and the pressures the administrators of those funds may feel when left insufficiently financed as a result of the misconduct of a handful of lawyer/scoundrels.

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