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Law School Case Brief

Goldman v. Kane - 3 Mass. App. Ct. 336, 329 N.E.2d 770 (1975)

Rule:

The law looks with great disfavor upon an attorney who has business dealings with his client which result in gains to the attorney at the expense of the client. The attorney is not permitted by the law to take any advantage of his client. The principles holding the attorney to a conspicuous degree of faithfulness and forbidding him to take personal advantage of his client are thoroughly established. When an attorney bargains with his client in a business transaction in a manner which is advantageous to himself, and if that transaction is later called into question, the court will subject it to close scrutiny. In such a case, the attorney has the burden of showing that the transaction was in all respects fairly and equitably conducted; that he fully and faithfully discharged all his duties to his client, not only by refraining from any misrepresentation or concealment of any material fact, but by active diligence to see that his client was fully informed of the nature and effect of the transaction proposed and of his own rights and interests in the subject matter involved, and by seeing to it that his client either has independent advice in the matter or else receives from the attorney such advice as the latter would have been expected to give had the transaction been one between his client and a stranger. 

Facts:

Defendant attorney Barry Kane, who had represented former client Lawrence E. Hill on a number of legal matters over a period of years, advised Hill regarding the purchase of a large boat, negotiations for its transfer, the registration thereof, and nautical requirements of the vessel, and, after unsuccessfully attempting to arrange financing for the purchase, agreed to loan Hill money through a corporation in which Kane owned 95 percent of the stock. As the executor of Hill's estate, plaintiff Maurice Goldman brought an action against Kane for monies allegedly due to Hill. Kane and Higley Hill, Inc., appealed from the judgment by which the probate court ordered them to pay $ 50,806, plus interest, to Goldman, on behalf of Hill's estate.

Issue:

Did attorney Kane and former client Hill have a fiduciary relationship which Kane breached?

Answer:

Yes

Conclusion:

The appeals court affirmed the probate court's ruling that Kane and Hill had a fiduciary relationship and that Kane breached his fiduciary obligations to the client by taking unfair advantage of that relationship. The court rejected the argument of Kane and his corporation that the attorney's conduct did not constitute a breach of his duty because the client fully understood the nature and effect of the transaction and because he was advised against entering into the transaction. The court held that the attorney's full disclosure and advice were not sufficient to immunize him from liability and that the fundamental unfairness of the transaction and overreaching by the attorney in his dealings with the client were self-evident because the attorney and his corporation received title to all of the client's property and the client was still required to repay the loan, with no entitlement to the property upon repayment. The court held that the attorney was under a duty not to proceed with the loan until he was satisfied that the client had obtained independent advice.

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