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12/15/88 In Re Lawrence S. Komar

December 15, 1988



532 N.E.2d 801, 125 Ill. 2d 427, 126 Ill. Dec. 930 1988.IL.1805

Disciplinary proceeding.


JUSTICE WARD delivered the opinion of the court. JUSTICE STAMOS took no part in the consideration or decision of this case.


The Administrator of the Attorney Registration and Disciplinary Commission filed a complaint charging the respondent, Lawrence Komar, with violating the Illinois Code of Professional Responsibility (107 Ill. 2d R. 1 -- 101 et seq.) and one of the predecessor codes of professional conduct.

The complaint alleged that the respondent was an officer and owned a one-third interest in Fiscal Management, Inc. (Fiscal), a corporation which, in turn, owned 75% of the stock in Midland Equities, Inc. (Midland). The complaint charged that between July 27, 1978, and September 16, 1981, "Midland sent various written communications, including letters and mailgrams, to defendants in foreclosure proceedings advising that Midland had devised a plan to help save their homes and requesting that they contact Midland immediately." It was also alleged that during this same period more than 1,000 persons executed contracts with Midland, pursuant to which Midland would receive a $1,000 fee for performing one of the following services: obtaining a loan commitment to pay the mortgage arrearage; obtaining a purchaser to buy the real estate with an option to repurchase; retaining counsel to determine the legal status of the foreclosure action and negotiate on behalf of the client prior to the foreclosure sale; or obtaining competent counsel to file a bankruptcy petition under chapter 13 of the United States Bankruptcy Code. In most instances, the customer, in exchange for the $1,000 fee, received simply a legal review of his case or was referred to a bankruptcy attorney. Midland never arranged to sell a client's home to another with a repurchase option, and in only a few instances did it obtain refinancing.

The respondent, it was alleged, provided legal services for Midland's customers incident to the contract and received a fee of $200 from Midland per customer. The complaint also alleged that the respondent failed to inform the individuals to whom he furnished legal advice that he had an interest in Midland. The Administrator alleged also that on March 10, 1981, Capital Concepts, Inc., was incorporated, and that until September 16, 1981, Capital, using the respondent's services, handled some of Midland's business.

The complaint charged that the respondent violated disciplinary rules of the Illinois State Bar Association Code of Professional Responsibility (1977) by acts committed prior to July 1, 1980, and rules of the Illinois Code of Professional Responsibility (107 Ill. 2d R. 1 -- 101 et seq.) by later conduct. Specifically, the respondent was charged with violating Disciplinary Rule 2 -- 101 and Rule 2 -- 101 by participating in the use of a form of public communication that included a deceptive statement; practicing under a name which is misleading as to identity, responsibility or status in violation of DR 2 -- 102and Rule 2 -- 101; soliciting professional employment in violation of DR 2 -- 103, DR 2 -- 103and Rule 2 -- 103; accepting employment in violation of DR 2 -- 104 and Rule 2 -- 104; violating DR 3 -- 101and Rule 3 -- 101(a) by aiding another in the unauthorized practice of law; violating DR 3 -- 102and Rule 3 -- 102(a) by sharing legal fees with a nonlawyer; violating DR 3 -- 103and Rule 3 -- 103(a) by forming a partnership with a nonlawyer; violating DR 5 -- 101and Rule 5 -- 101(a) by accepting employment when his professional judgment may have been affected by his own financial, business, property or personal interests; violating DR 5 -- 107and Rule 5 -- 107(b) by accepting compensation for legal services from one other than a client; entering into an agreement for, charging or collecting an illegal or excessive fee in violation of DR 2 -- 107 and Rule 2 -- 106; failing to refund promptly any part of a fee paid in advance in violation of DR 2 -- 111 and Rule 2 -- 111(a)(3); and engaging in conduct involving dishonesty, fraud, deceit or misrepresentation in violation of DR 1 -- 102(4) and Rule 102(a)(4).

Specific counts alleged instances where individuals responded to Midland's or Capital's solicitations, executed a contract after an interview with a Midland or Capital representative, and advanced either the entire $1,000 called for in the contract or a portion of it. Other counts alleged that there were customers who claimed a refund of the fee after one of Midland's or Capital's representatives referred the customer's case to a bankruptcy attorney or the customer obtained financing on his own, but no refund was ever received. The conduct alleged in each of these counts of the complaint constituted, it charged, was a violation of the disciplinary rules set out above.

In addition, there was one count charging the respondent with solicitation of employment in violation of Rule 2 -- 103. That count charged that on or about March 1981, Charles Daniels received a telephone call from a person who identified himself as the respondent and stated that he was aware of a pending foreclosure action brought against Daniels. At the caller's request, Daniels met the respondent at his office and agreed to pay him $1,000 as a fee. The respondent filed an appearance on behalf of Daniels in the foreclosure litigation, and thereafter, Daniels paid the respondent $500.

The respondent filed an answer to the Administrator's complaint on December 2, 1983, admitting all of its factual allegations, but denying that they constituted misconduct warranting discipline. On January 12, 1984, the respondent filed a motion for judgment on the pleadings, which was denied by a panel of the Hearing Board of the Commission. After a hearing, a majority of the panel found that each allegation of misconduct in the complaint had been proved by clear and convincing evidence, and recommended that the respondent be suspended from the practice of law for a period of six months. The panel observed that the solicited group was composed of desperate, unemployed, minimally educated, unsophisticated persons, distraught by the threatened loss of their homes. The Dissenting member of the panel considered that only financial counseling was involved and voted that the complaint be dismissed.

The Administrator and the respondent filed exceptions before the Review Board, and on March 2, 1987, the Review Board unanimously approved the report and recommendations of the Hearing Board. The Administrator filed exceptions regarding the sanction recommended by the Hearing and Review Boards, and we allowed the respondent's motion to allow his exceptions to the Hearing Board's report to stand as his exceptions to the report of the Review Board.

The respondent is 44 years of age and was admitted to the bar of Illinois in 1969. In 1976, the respondent and two other individuals, who were nonlawyers, formed Fiscal Management, Inc., whose stated purpose was to arrange financing for commercial borrowers. The respondent owned one-third of the corporation's stock. In July 1978, the respondent and Lloyd Baretz, Norman Behrens and Michael Wichman, who were nonlawyers, formed Midland Equities, Inc. Fiscal acquired 75% of the corporation's stock and Michael Wichman owned the other one-fourth share. The respondent, Baretz, Behrens and Wichman were made directors of the corporation, and the respondent was named as president of Midland.

Between its formation, in July of 1978, and September of 1981, Midland mailed a variety of fliers, ads and other solicitations to owners of single-family dwellings which were the subject of pending mortgage foreclosure actions filed in the circuit court of Cook County. The respondent testified that he was aware of these mailings and had reviewed them prior to distribution. He denied he took part in their drafting or distribution however.

Between July 7, 1978, and December 31, 1980, approximately 2,000 individuals named in foreclosure actions responded to the solicitations and were interviewed by either Gina Miller, an employee of Midland, Baretz, Behrens or Wichman. Approximately 1,000 persons executed contracts with Midland, the terms of which provided that Midland would receive a $1,000 fee if it provided a "solution" to the foreclosure action that would permit the client to remain in his or her home. According to the contract, the proposed solutions included: (1) obtaining refinancing; (2) finding a purchaser for the customer's home who would consent to an option to repurchase; (3) retaining counsel to determine the legal status of the foreclosure action and negotiate on behalf of the client; or (4) obtain counsel to file a bankruptcy petition. Before the contract was signed, the customer was told that in the event Midland's efforts were unsuccessful in avoiding foreclosure, the $1,000 fee would be refunded.

The evidence was that the respondent participated in drafting the form contract and that he interviewed customers after they had signed contracts. The respondent would introduce himself to the customer as an attorney, explain the alternative "solutions" available under the contract and make a "legal analysis" of their case. He testified that he would review the foreclosure petition for legal sufficiency, and in certain instances, he filed an appearance on behalf of the customer. The Hearing Board panel found that Midland paid the respondent $200 from each $1,000 fee received from foreclosure defendants.

The evidence showed that in most instances the "solution" provided the customer was simply a referral to a nonassociated attorney for the filing of a chapter 13 bankruptcy petition. The respondent testified that in less than 15% of the cases did Midland arrange for financing. In no case, it appears, did the respondent or anyone associated with Midland inform the customer that the respondent had an interest in Midland or that he received compensation from Midland for legal services for its customers.

In the spring of 1979, the respondent resigned as Midland's president and unsuccessfully attempted to sell his interest in Midland to Gina Miller. The respondent acknowledged that after Midland ceased operations in 1981, he conducted the same activity as that performed by Midland under "Capital Concepts, Inc." until November 1982. The record shows that Gina Miller was Capital's sole shareholder and that the respondent maintained both a professional and personal relationship with her. The respondent also acknowledged that his personal law office was located in the same suite of offices as Capital's and that he had a part ownership in the building in which the offices were located. During this time, the respondent received $1,000 to $2,000 per pay period in compensation from Capital.

The respondent argues that the Hearing Board erred in denying his motion for judgment on the pleadings on the ground that the Administrator's complaint fails to set out facts which, if proved, would constitute ethical violations. His principal contention is that the facts do not show that he can be considered responsible for the actions of Midland or Capital. The respondent contends that because the complaint does not allege that he personally participated in soliciting Midland's or Capital's customers, or that the solicitations were sent at his direction, he cannot be held responsible for the corporations' actions. He argues, but inaccurately, that his only connection with Midland or Capital was that he owned stock in Midland and was one of its officers, and that he was simply an employee of Capital. Accordingly, the respondent concludes, the Administrator has failed to allege facts showing a violation of DR 2 -- 101 or Rule 2 -- 101.

The respondent also contends, but erroneously as will be pointed out, that because it was not alleged that he rendered legal services to Midland or Capital's customers, the Administrator has failed to plead facts alleging that he accepted compensation other than from a client; that he aided others in the practice of law; that he shared legal fees with a nonlawyer; or that he formed a partnership with nonlawyers. According to the respondent, the complaint can be construed as alleging simply that he rendered legal services to Midland and Capital in the capacity of in-house counsel. Consequently, he says, the complaint does not set out sufficient facts of misconduct which would constitute violations.

In In re Beatty (1987), 118 Ill. 2d 489, 499, this court stated:

"The rules of the Commission require that a complaint state the facts of the misconduct charged and inform the lawyer of what he or she is accused. That reflects, of course, the basic law regarding the nature of a complaint which requires that it contain a statement of facts constituting the cause of action claimed. A complaint that does not allege facts, the proof of which are necessary to entitle a plaintiff to judgment, fails to state a cause of action. The complaint must contain factual allegations of every fact which must be proved in order for the plaintiff to be entitled to judgment on the complaint, and a judgment cannot be rendered on facts demonstrated by evidence at trial unless those facts shown were alleged in the complaint. [Citations.] The specific allegations of facts that must appear in a complaint depend on the nature of the cause of action claimed. The complaint here must have charged personal professional misconduct as to each defendant and have made specific factual allegations. While a pleading will not be held to be bad in substance if it contains sufficient information as will reasonably inform a defendant of what he must defend against, that liberality of pleading will not relieve the necessity that a complaint contain sufficient, factual averments and set out every fact essential to be proved."

See also In re Harris (1982), 93 Ill. 2d 285, 292.

We consider that the Administrator's complaint does allege sufficient facts which, if proved, would show ethical violations. It is of no matter that the complaint does not allege that the respondent personally participated in soliciting Midland's or Capital's customers. The complaint states that the respondent, through his ownership in Fiscal, owned a 25% interest in Midland; that part of the "services" Midland proposed to render its clients was "retaining counsel to determine the legal status [of the foreclosure action]"; that the respondent performed the legal services promoted in the solicitations; and that Midland compensated the respondent for his services. The complaint also alleged that the respondent provided the same services for Capital's customers as he did for Midland's. It is clearly alleged in practical effect that Midland and Capital were in part soliciting business in which the respondent would share and participate as "retained counsel" and that he was aware of the solicitations.

Also, there is no merit to the respondent's contention that the complaint can be reasonably construed as alleging simply that he was Midland's or Capital's lawyer, performing services solely in the capacity as their inhouse counsel. The complaint plainly states that the respondent provided "legal services . . . for Midland customers"; that the respondent was compensated by Midland at a rate of $200 for reviewing the customer's case; and that the respondent did not disclose to Midland's customers that he had an interest in Midland. The allegations sufficiently state misconduct which, if proved, would have been a violation. The respondent's motion for judgment on the pleadings was properly denied.

The respondent next contends that the Administrator has failed to prove by clear and convincing evidence the ethical violations charged in the complaint.

The Administrator must prove each allegation by clear and convincing evidence. (In re Enstrom (1984), 104 Ill. 2d 410, 416; In re Woldman (1983), 98 Ill. 2d 248, 254; 107 Ill. 2d R. 753(c).) While the Hearing Board's findings are entitled to the same weight as those of any other fact finder (In re Levin (1984), 101 Ill. 2d 535, 539), this court will not accept the Board's findings if ...

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