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In re Spak

September 30, 1999

IN RE LINDA LEE SPAK, ATTORNEY, RESPONDENT.


The opinion of the court was delivered by: Justice Heiple

Agenda 32-May 1999.

The Administrator of the Attorney Registration and Disciplinary Commission filed a complaint with the Hearing Board charging respondent, Linda Lee Spak, with conversion, failure to reduce a contingent fee agreement to writing in violation of Rule 1.5(c) of the Illinois Rules of Professional Conduct, failure to notify a third person upon receiving funds in which the third person has an interest in violation of Rule 1.15(b), knowingly making a false statement of material fact or law to a third person in the course of representing a client in violation of Rule 4.1(a), conduct involving dishonesty, fraud, deceit, or misrepresentation in violation of Rule 8.4(a)(4), and conduct prejudicial to the administration of Justice in violation of Rule 8.4(a)(5). The charges arose out of respondent's activity in collecting a debt on behalf of Rosario T. Miranda. Respondent denied that she committed misconduct and disputed many of the facts alleged in the complaint.

Following a hearing, the Hearing Board found that respondent had engaged in conversion and had failed to reduce a contingent fee agreement to writing. The Hearing Board concluded that the Administrator failed to prove by clear and convincing evidence that respondent engaged in the other misconduct charged. The Hearing Board recommended that respondent be censured. The Review Board approved the findings and recommendation of the Hearing Board, except that it found that respondent's actions in regard to the contingent fee arrangement did not constitute misconduct under Rule 1.5(c). We granted the Administrator's petition for leave to file exceptions. For the reasons that follow, we approve in part and reject in part the findings of the Review Board, approve the findings of the Hearing Board, and approve the recommendations of the Hearing Board and Review Board.

BACKGROUND

I. The Evidence

Respondent was licensed to practice law in 1982. Respondent was a sole practitioner, with a general civil practice. Approximately 20% of her practice involved collection work.

Rosario T. Miranda was formerly married to Dr. Regalado S. Florendo. They were divorced in 1985. Under the judgment for dissolution of marriage entered December 31, 1985, Florendo was made the owner of the parties' 19% interest in the 32 West Randolph Street Limited Partnership (hereinafter, the limited partnership). The judgment directed that, within 60 days after its entry, Florendo was to establish a trust and transfer into it his ownership in the limited partnership. The judgment specified that Florendo was to be the trustee of the trust and that he and Miranda were to be equal beneficiaries. The judgment also provided that, upon any sale of the parties' interest in the limited partnership, Florendo and Miranda would each receive one-half of the net sale proceeds.

Florendo did establish a trust, but this trust was not established until May 19, 1989 (hereinafter, the May 1989 trust). As such, it was not the trust described in the judgment for dissolution of marriage. Under the May 1989 trust, Florendo was the trustee; his sister, Clarita F. Navarro, was designated the successor trustee. Florendo transferred various property into this trust, including all of his interest in the limited partnership. Florendo died shortly thereafter and Navarro succeeded him as sole trustee of the May 1989 trust.

On October 6, 1989, Navarro signed an assignment agreement as trustee of the May 1989 trust. This document indicated that Navarro owned a 19% interest in the limited partnership. Navarro assigned that interest to Morris Kalish, the general partner, for a purchase price of $332,500. While the assignment agreement did not refer to Miranda, she consented to the transaction. Florendo's corporation, Urban Health Services, Inc. (Urban), which Navarro owned after Florendo's death, was indebted to Kalish for $50,000 plus interest. The assignment agreement indicated that this debt would be repaid by giving Kalish a credit against the purchase price. The assignment agreement also established a schedule of payments; the final payment of $46,500 was due on February 28, 1990.

The final installment under the assignment agreement was not paid when due and remained outstanding as of August 1991. At that time, Miranda retained respondent to represent her in attempting to collect this debt. When she retained respondent, Miranda told her that she was entitled to receive money under a divorce decree. Miranda also told respondent that she was the trustee of a trust; however, Miranda did not give respondent supporting documentation. Miranda did give respondent copies of the judgment for dissolution of marriage and of the assignment to Kalish.

Before the Hearing Board, respondent testified that she believed Miranda's statement that Miranda was the trustee. According to respondent, she assumed that Miranda was the successor trustee of the trust which was to have been established under the judgment for dissolution of marriage. Respondent testified that she made this assumption for several reasons. First, the judgment directed that a trust be created by March 1, 1986; respondent assumed that this had actually been done. Under the terms of the judgment, this trust was supposed to contain the limited partnership interest. Miranda and Florendo were the only persons named in connection with that trust, and they were to be the trust's sole and equal beneficiaries. Respondent knew that Florendo was now deceased. In addition, the judgment provided for another trust, which was to contain $1.5 million for the benefit of Miranda and the couple's minor children. Miranda and Navarro were co-trustees of this trust. Finally, respondent considered a letter from Carl Gorski, attorney for the May 1989 trust, which had been sent to Miranda on July 19, 1989. This letter confirmed that Miranda was entitled to one-half the proceeds of the sale of the property. The letter also referred to Florendo's will and indicated that each of Florendo's minor children was an equal residuary beneficiary of his trust.

Given the disparity in time between the judgment for dissolution of marriage and the creation of the May 1989 trust, respondent concluded that the trust described in the judgment was a different trust from the May 1989 trust. Respondent knew that Navarro was trustee of the May 1989 trust. Respondent testified that she had not seen any documents which confirmed her assumption that Miranda was the trustee of a trust which held title to the limited partnership. It appears that the trust described in the judgment was never, in fact, established.

As of August 1991, respondent still had not seen a copy of the May 1989 trust agreement. Respondent testified that she repeatedly attempted to obtain a copy of this document, both from Miranda and from Gorski, but it was not provided to her until after the debt was settled. She testified that she periodically requested that Gorski send her copies of other trust documents but she never received them.

On August 23, 1991, respondent wrote a letter to Kalish. Respondent had not asked Gorski, Navarro, or anyone other than Miranda for permission to attempt to collect the debt directly from Kalish. In her letter, respondent indicated that she had been retained to represent Miranda in collecting the delinquent balance due to the Florendo trust under the assignment agreement. Respondent indicated that the amount due was $46,500, plus interest, and demanded payment. She sent copies of this letter to Navarro and Gorski because the assignment agreement directed that they be notified of any action taken regarding the assignment, and because respondent wanted to put them on notice of her efforts to collect the unpaid amount.

Kalish did not respond to respondent's letter. On May 7, 1992, respondent again wrote Kalish and stated that she had been retained to represent Miranda in collecting the delinquent balance due to the Florendo trust. Respondent demanded payment of $59,996.20 (the delinquent principal plus interest). Copies of this letter were also sent to Navarro and Gorski. After receiving this letter, Kalish telephoned respondent, but the matter was not resolved at that time.

On June 2, 1992, respondent again wrote to Kalish. This letter indicated that Miranda's 19% interest in the 32 West Randolph Building would be sold unless all sums due to Miranda were paid in full prior to the date set for sale. According to the letter, the interest in the building was pledged to Miranda pursuant to the assignment agreement. The accompanying notice of sale of collateral described Miranda as the creditor and as the legal owner of 19% of the 32 West Randolph property. Respondent testified that copies ...


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