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Commonwealth of Massachusetts

Public Reprimand No. 2005-15



STEPHEN T. DAVID

Order (public reprimand) entered by the Board July 29, 2005.

SUMMARY1


At all times relevant to the petition for discipline, the respondent was the president and 50% shareholder of a Massachusetts corporation in the business of constructing residential homes.

In 1998 and 1999, the respondent represented the co-owner of the construction company (the “seller”) in the proposed sale of the seller’s personal residence to a husband and wife (the “buyers”). Independent counsel represented the buyers in the transaction.

On or about March 11, 1998, the seller entered into a purchase and sale agreement (“P & S agreement”) with the buyers, pursuant to which the buyers agreed to purchase the seller’s personal residence. The P & S agreement provided that the closing would take place no later than November 30, 1998. The P & S agreement also named the respondent as escrow agent, and provided that he would hold all deposits in escrow. The respondent did not disclose to the buyers that he was in business with the seller and that the seller planned to use the proceeds of the sale to build a new home through the construction company owned in part by the respondent.

On or about March 11, 1998, the buyers paid the respondent a $10,500.00 deposit to hold in escrow until the closing. As escrow agent, the respondent was prohibited from disbursing the escrow funds without instructions to do so from the buyers and the seller.

Shortly after receiving the $10,500.00 deposit from the buyers in March 1998, the respondent paid the full amount of the $10,500.00 escrow to his client, the seller, to be used as a down payment on a new home that seller was building for himself. The respondent did not request permission from the buyers to release the escrow funds to his client, and he did not inform the buyers that he had done so. The seller deposited the escrow funds to a checking account maintained by the construction company that was building the new home for the seller. The respondent did not disclose to the buyers that the escrow funds had been paid to the construction company jointly owned by the respondent and the seller.

The closing was originally scheduled for November 30, 1998. The seller requested an extension of the closing until December 30, 1998, which was granted by the buyers. On about December 15, 1998, the seller requested another extension until February of 1999, which was denied by the buyers. The respondent returned the escrow funds to the buyers.

By agreeing to act as escrow agent without disclosing to the buyers his business stake in the construction company that was building the seller’s new home, the respondent violated Mass. R. Prof. C. 8.4(h). By failing to maintain the buyers’ deposit intact until the closing and by disbursing the escrow funds to the seller without the permission of the buyers, the respondent violated Mass. R. Prof. C. 1.15(a), as in effect prior to July 1, 2004.

The respondent was admitted to the Massachusetts bar in 1981. He had no prior discipline.

The matter came before the Board of Bar Overseers on a stipulation of facts and a joint recommendation for discipline. The Board of Bar Overseers accepted the parties’ recommendation and imposed a public reprimand on July 18, 2005.

1 Compiled by the Board of Bar Overseers based on the record of proceedings before the Board.



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