Legal Ethics Opinion #1522

 Attorney Misconduct - Obligation to Report Misconduct - Zealous
Representation - Non-Client Fraud Upon a Tribunal: Attorney
Misstating Purchase Price of Property on Recorded Deed

You have presented a hypothetical situation in which Seller
acquires a parcel of commercial real property for $250,000. 
Attorney A represents Seller in the acquisition and the
subsequent sale of the commercial real estate.  Purchaser is
represented by Attorney B in all aspects of the sale transaction,
including contract negotiation. The contract states that the
purchase price is $425,000. Purchaser provides funds to Attorney
A as Seller's attorney for the $425,000 transaction, based upon a
settlement statement reflecting $425,000 to be the purchase price
pursuant to the contract.

You further indicate that Purchaser causes the deed to be
recorded with the consideration being stated to the clerk as
$250,000.  State grantor's tax pursuant to 58.1-802 (formerly
58-54.1) of the Code of Virginia, as amended, is paid on the
$250,000 stated consideration.  You indicate that Attorney A then
contacts Attorney B after learning of the incorrectly stated
consideration and that he is informed by Attorney B that his
client (Purchaser) considers the difference to be consulting fees
and not a part of the purchase price.  You further indicate that
Attorney B states that his client is merely duplicating the
acquisition transaction in which Seller acquired title to the
property.  Finally, you indicate that Attorney A then goes to the
clerk's office and confirms by viewing the original instrument
that the purchase price was stated to the Clerk as being $250,000
and that the state grantor's tax is based upon that amount. 

You have asked the committee to opine whether, under the facts of
the inquiry, the conduct described constitutes unethical conduct
by Attorney B.  You also inquire as to ethical obligations of
Attorney A.  Finally, you ask whether Attorney A is obligated to
report [to the Bar] the misstatement of consideration to the
clerk.

The appropriate and controlling Disciplinary Rules related to
your inquiry are DRs 1-102(A)(4) which states that a lawyer shall
not engage in conduct involving dishonesty, fraud, deceit, or
misrepresentation which reflects adversely on a lawyer's fitness
to practice law; 1-103(A) which provides that a lawyer having
information indicating that another lawyer has committed a
violation of the Disciplinary Rules that raises a substantial
question as to that lawyer's fitness to practice law in other
respects, shall report such information to the appropriate
professional authority; 7-102(A)(5) which states that a lawyer
shall not knowingly make a false statement of law or fact; and 7-
102(B)(1) which requires that a lawyer who receives information
clearly establishing that a person other than his client has
perpetrated a fraud upon a tribunal shall promptly reveal the
fraud to the tribunal.

The facts you have provided indicate that Attorney B represented
Purchaser throughout all phases of the sale and that Attorney B
was aware of the $425,000 contract price.  The facts also
indicate that Attorney B was aware that the deed was recorded
with the consideration stated as $250,000.  Based upon these
facts, the committee is of the opinion that Attorney B thus
knowingly made a false statement of fact, in violation of DR 7-
102(A)(5).  Such conduct may also be violative of DR 1-102(A)(4). 
See LEO #1429.

As to Attorney A's ethical obligations, the committee believes
that the attorney may have a duty to report Attorney B's
misconduct under DR 1-103(A) since that rule contains a two-prong
test: first, a lawyer must have information indicating that
another lawyer has committed a violation of the Disciplinary
Rules.  Since the committee has opined above that Attorney B's
conduct is violative of DR 7-102(A)(5), the committee believes
that the first prong has thus been satisfied.

Second, the lawyer in possession of information regarding the
conduct of another lawyer must determine whether the misconduct
"raises a substantial question as to that lawyer's fitness to
practice law in other respects."  Relevant factors to be
considered include, but are not limited to: the recency of the
conduct; the seriousness of the conduct; the likelihood that the
behavior will be repeated; the likelihood that it will affect the
attorney's competence; and any mitigating or aggravating
circumstances.  The committee is of the opinion that Attorney B's
knowingly stating an incorrect consideration on a deed for the
purpose of avoiding the payment of the state grantor's tax on a
higher amount, does raise a substantial question as to the
lawyer's fitness to practice law in other respects.  

Finally, under the facts you have presented, as to whether
Attorney A is obligated to report the misstatement to the clerk,
the committee is of the opinion that under the plain language of
the standard articulated in DR 7-l02(B)(l), Attorney A is
obligated to report the misstatement of the purchase price to the
tribunal, i.e., the clerk, unless there are mitigating factors as
enumerated above (including but not limited to: the recency of
the conduct; the seriousness of the conduct; the likelihood that
the behavior will be repeated; the likelihood that it will affect
the attorney's competence). 

Committee Opinion
May 11, 1993