Docket No. 87237–Agenda 32–May 1999.

In re LINDA LEE SPAK, Attorney, Respondent.

														Opinion filed September 30, 1999.

	JUSTICE HEIPLE delivered the opinion of the court:

	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 cotrustees 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 of these documents were sent to, among others, Gorski

and Navarro. The letter itself indicates only that a copy was sent to

Navarro.

	Neither Gorski nor Navarro (nor anyone else) ever requested

that respondent discontinue her attempts to collect the debt directly

from Kalish, nor did anyone indicate that respondent lacked the

authority to proceed. Likewise, no one contacted respondent to

assert any claim of the May 1989 trust to any money due from

Kalish. Consequently, respondent assumed that Gorski and

Navarro did not object to her collection efforts.

	Eventually, Kalish responded to the June 2 letter and

negotiated a settlement with respondent. On behalf of Miranda, and

without notifying Gorski or Navarro, respondent agreed to accept

$38,000 in settlement of the claim. In payment of the settlement,

Kalish sent respondent a check for $38,000 payable to the

Regalado S. Florendo Trust and Linda Spak. Prior checks had been

made payable to “Regalado S. Florendo Trust, dated May 19,

1989” and had been sent to Navarro. Respondent’s name was

included as a payee on the settlement check to expedite negotiation

of that check. Respondent did not discuss with Kalish how to

designate the other payee.

	After receiving the check, respondent contacted Miranda. In

a June 16, 1992, letter, Miranda authorized respondent to execute

the settlement check in Miranda’s name as trustee. Respondent

endorsed the check “Regalado S. Florendo Trust by Rosario T.

Miranda, Trustee” and deposited it into her client trust account.

Respondent did not contact Gorski or Navarro at that time to

determine any interest of the May 1989 trust, nor did she obtain

their authority to endorse the check. However, respondent testified

that she did notify Gorski and Navarro upon her receipt of the

check.

	When respondent distributed the settlement proceeds received

from Kalish, she knew that Miranda was only entitled to half the

proceeds from the sale of the interest in the limited partnership.

However, respondent testified that, according to her calculations,

due to set-offs for Urban’s debts, she believed Miranda was entitled to all the money that was received from Kalish. She

believed that the May 1989 trust was owed nothing.

	At the time respondent agreed to represent Miranda, she did

not enter into a written fee agreement. Respondent testified that

they agreed on the fee terms and that Miranda had understood

those terms. Respondent indicated that the fee was to be a $500

retainer, with a contingent fee of one-third of any recovery. The

retainer was to be credited against any contingent fee. Miranda’s

June 1992 letter to respondent confirmed Miranda’s understanding

of these fee terms and directed respondent to remit the balance to

Miranda. After depositing Kalish’s check, respondent took fees

consistent with the terms of Miranda’s letter, and sent Miranda a

certified check for the balance of $25,833.33.

	On August 11, 1992, Gorski wrote to respondent. In this

letter, Gorski acknowledged that, as of June 15, 1992, Miranda

was entitled to $30,756.52, but asserted that as of August 15,

1992, the trust was owed $8,863.02. He demanded payment of that

amount on behalf of the trust. Gorski asserted that Kalish’s final

payment should have been, but was not, made to the May 1989

trust.

	Respondent testified that she was shocked and confused by

Gorski’s claim that the trust was entitled to funds. Respondent

testified that if such a claim had been asserted previously, she

would not have proceeded with collection efforts or distributed the

money as she did.

	Gorski sent respondent a second letter, on August 19, 1992,

again demanding payment of $8,863.02 plus interest to the trust.

With this letter, Gorski sent respondent copies of the May 1989

trust agreement. Respondent had not seen this document before

settling with Kalish.

	In September 1992, respondent wrote to Miranda and sent her

an accounting of the payments made in connection with the

assignment. Respondent advised Miranda that Kalish’s final

payment had resulted in an excess paid to Miranda, and a deficit

due the trust, of $8,862. Respondent proposed that Miranda offer

the trust that amount, less a proportionate share of attorney fees.

Miranda did not respond. Thereafter, respondent was unable to

reach Miranda, and had heard that Miranda was out of the country.

	The trust retained counsel, who wrote to respondent in

December 1993, threatening to sue if the matter were not resolved.

On June 1, 1994, Navarro filed a civil lawsuit against respondent.

On February 17, 1995, the court entered summary judgment in

favor of the trust and against respondent for $38,000 plus post-

judgment interest. This was based on respondent’s endorsement of

the check and the court’s view that she had converted the full

settlement proceeds.

	In April 1995, respondent and the trust entered into a

settlement agreement under which respondent was to pay the

trustee $24,000 in three installments. Respondent made the first

payment, of $14,000, but was unable to pay the subsequent

installments. Respondent did not contact opposing counsel to

attempt to make alternative arrangements. After a citation to

discover assets was filed, respondent negotiated new settlement

terms, such that she would pay an additional $15,000. She

ultimately paid this amount in three installments, completing

payment in February 1997. All told, respondent paid the trust a

total of $29,000 out of her own funds. Miranda did not send

respondent any money towards these payments.

	In her testimony before the Hearing Board, respondent

acknowledged that she had made a mistake. In retrospect, she

realized that she should not have endorsed the check without

having a better understanding of her authority to do so.

Respondent recognized, in hindsight, that she had not had authority

to negotiate the check; however, at the time she negotiated it, she

thought she did have such authority.

	Navarro also testified before the Hearing Board. She indicated

that she did not recall receiving any letters from respondent, nor

had she spoken to respondent. Navarro did not recall speaking to

Gorski about respondent’s collection efforts, and did not know

prior to June 15, 1992, that respondent received a settlement.

According to Navarro, the trust paid approximately $23,000 in

legal fees attempting to collect its portion of the settlement.

	The parties stipulated that, if called as a witness, Gorski would

have testified as follows. He received copies of respondent’s

August 23, 1991, and May 7, 1992, letters to Kalish. Neither he

nor Navarro authorized respondent to make collection efforts on behalf of the trust. Gorski became aware in August 1992 that

respondent had agreed with Kalish to accept $38,000 in settlement

of all outstanding amounts owed to the trust. He later learned that

respondent had negotiated the settlement check and distributed the

proceeds to herself and Miranda. Gorski would have testified that

he did not speak with respondent before this, and that he and

Navarro were not informed that respondent was involved in

settlement negotiations with Kalish, were not asked to approve the

offer of $38,000, and did not authorize respondent to settle the

trust’s claim against Kalish.

	John Bubula, the accountant for the May 1989 trust, testified

that Kalish made his prior payments to the trust. Consistent with

her rights under the divorce decree, Miranda received one-half of

the proceeds as the trust received them. All concerned relied upon

the judgment as the basis for Miranda’s interest in the property.

There were no other documents memorializing her interest. Bubula

indicated that, because of the offset for Urban’s debts, the trust

retained less than 50% of the installment payments due from

Kalish. According to Bubula’s calculations, the trust was entitled

to $8,694.78 of the final payment from Kalish. While he had never

spoken with respondent, Bubula knew, through Gorski, that

respondent was corresponding with Kalish. Bubula and Gorski had

discussed the matter and respondent’s collection efforts. Bubula

first learned of the settlement after Kalish made final payment.

	Respondent also presented the testimony of character witness

Eric Romer, who had known respondent for several years and

shared office space with her. Romer described respondent as a very

competent attorney, caring, well-qualified, and meticulous.

Respondent had no prior discipline. Throughout her legal career,

respondent had regularly performed pro bono work, handling three or four cases per year through Chicago Volunteer Legal Services.

II. The Hearing Board

	In its report and recommendation, 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 Board also indicated its view that the

facts demonstrated a lack of vigilance rather than fraud. The

Hearing Board expressly found no dishonest motive on

respondent’s part. The Hearing Board regarded respondent’s

demeanor and testimony as credible. The Board noted that

respondent had expressed regret and regarded her as likely to be

more careful in the future. The Board also considered respondent’s

pro bono work, her lengthy period of practice without prior discipline, and the fact that she had returned the funds converted,

albeit pursuant to court order. In its conclusion, the Hearing Board

recommended that respondent be censured.

III. The Review Board

	The Review Board agreed with the Hearing Board that

respondent engaged in conversion, but held that respondent’s

actions in regard to the contingent fee arrangement did not

constitute misconduct under Rule 1.5(c). The Review Board

reasoned that, while there was no written agreement on fees at the

outset of the representation, respondent and Miranda did reach a

complete understanding of how the fees were to be determined.

This understanding was confirmed, in writing, by Miranda before

respondent actually took any fees. The Review Board noted that

it is not advisable to delay memorializing the terms of a contingent

fee agreement in writing. Nevertheless, the Review Board found

that under the specific circumstances of this case, the purposes

underlying Rule 1.5(c) were adequately served and thus that

misconduct should not be found.

	The Review Board accepted the Hearing Board’s finding that

respondent acted without dishonest intent, and did not profit from

her actions. Rather, respondent acted at the direction of her client

in a manner which she honestly, albeit erroneously, thought was

legitimate. According to the evidence adduced at the hearing,

respondent repeatedly gave notice of her actions to the trust’s

attorney and to the trustee, and was never told that she was acting

without authority. Moreover, although respondent periodically

asked Gorski to furnish copies of the trust documents (which might

have alerted respondent that her client was not the trustee), Gorski

failed to send the documents.

	Despite these mitigating factors, however, the Review Board

found that respondent’s conduct demonstrated a serious lack of

care. She assumed, without seeing supporting documentation, the

truth of her client’s representations that she was the trustee of a

trust which owned valuable property. Respondent made this

assumption in the face of documents that suggested that someone

else, i.e., Navarro, was the trustee. Respondent proceeded to act without obtaining further documentation to clarify the identity of

the trustee. She then not only settled the claim, but also endorsed

the settlement check despite the ambiguities presented. The Review

Board found that respondent’s lack of care went beyond simple

negligence. Although it turned out that respondent was the only

person truly harmed by her error, respondent’s actions could easily

have backfired to the detriment of her client and of third parties.

Because of the serious nature of the carelessness which led to her

conversion of the settlement proceeds, the Review Board found

that respondent’s conduct warranted discipline, and recommended

that respondent be censured.

IV. The Administrator’s Exceptions

	The Administrator has filed exceptions to the Review Board’s

finding with this court, and argues that: (1) the Hearing and

Review Boards erred in finding that respondent did not engage in

conduct involving dishonesty, fraud, deceit, or misrepresentation

in converting the trust funds; (2) the Review Board erred in

reversing the Hearing Board’s finding that respondent violated

Rule 1.5(c) by failing to reduce the contingent fee agreement to

writing; and (3) respondent’s misconduct warrants a term of

suspension.

ANALYSIS

	The Administrator argues first that the Hearing and Review

Boards erred in finding that respondent’s conduct did not manifest

a fraudulent intent. On the contrary, contends the administrator,

respondent’s actions in attempting to collect a debt owed to the

trust, without first verifying that her client was actually the trustee

of that trust, were so grossly reckless that they support a finding of fraudulent intent as a matter of law.

	This court has noted that the Hearing Board’s findings

regarding the credibility of witnesses, the resolution of conflicting

testimony, and any other fact-finding judgments are entitled to

great deference. In re Blank, 145 Ill. 2d 534, 547 (1991).  This is due to the fact that the Hearing Board is able to observe the

witnesses’ demeanor and judge their credibility. In re Hopper, 85 Ill. 2d 318, 323 (1981). Thus, the Hearing Board’s factual

determinations will generally not be disturbed unless they are

against the manifest weight of the evidence. In re Rinella, 175 Ill. 2d 504, 517 (1997).

	In the instant case, we find no reason to disagree with the

Hearing Board’s finding that respondent’s actions in collection of

the debt did not involve a dishonest or fraudulent motive. Evidence

was presented on both sides of this issue, and the Hearing Board,

which was in a better position to judge such matters as credibility

and intent, found that respondent did not act with a dishonest

motive. Of particular note here, the Hearing Board heard testimony

that respondent repeatedly advised both the actual trustee and the

trust’s attorney of her collection efforts. Such conduct is

inconsistent with an intent to defraud the trust.

	The Administrator next argues that the Review Board erred in

finding, sua sponte, that respondent did not violate Rule 1.5(c) by failing to reduce the contingent fee agreement to writing. We

agree.

	The Review Board found that the purposes of Rule 1.5(c) are

“sufficiently served” where “the client knew the fee terms from the

outset and the client herself has fully confirmed the terms in writing

before the attorney receives a fee.” Contrary to the Review

Board’s finding, the writing requirement of Rule 1.5(c) is

mandatory. That rule provides:

		“A contingent fee agreement shall be in writing and shall

state the method by which the fee is to be determined,

including the percentage or percentages that shall accrue

to the lawyer in the event of settlement, trial or appeal,

litigation and other expenses to be deducted from the

recovery, and whether such expenses are to be deducted

before or after the contingent fee is calculated.” 134 Ill. 2d R 1.5(c).

The writing requirement of Rule 1.5(c) contains no exception.

More importantly, the Review Board’s reading of the rule would

permit an attorney to wait to reduce a contingent fee to writing

until after the work is done and the attorney is in possession of the

proceeds of litigation. A client in such a situation may be left with

the unenviable choice of agreeing with his attorney’s recollection

of the fee agreement, or delaying receipt of his money pending

resolution of a fee dispute. The inequality of bargaining power

between the attorney and client in such a case is readily apparent.

We decline to adopt a rule so fraught with potential for abuse. We

therefore hold that respondent is guilty of misconduct for failing to

reduce a contingent fee to writing in violation of Rule 1.5(c).

	Finally, the Administrator argues that respondent’s misconduct

warrants a term of suspension and asks this court to enter an order

suspending respondent from the practice of law for six months. In

imposing discipline, our purpose is not to punish the attorney, but

rather to “protect the public, to maintain the integrity of the

profession and to protect the administration of justice from

reproach.” In re Fox, 122 Ill. 2d 402, 410 (1988).  Our goal is to impose sanctions consistent with sanctions imposed for similar

misconduct so as to ensure predictability and fairness in future

disciplinary cases. In re Hopper, 85 Ill. 2d 318, 324 (1981). We note, however, that each case is unique and must be resolved with

respect to its particular facts and circumstances. In re Ushijima, 119 Ill. 2d 51, 57 (1987).

	Both the Administrator and respondent have cited numerous

cases in their respective arguments for either a six-month

suspension or a censure. We find the cases of In re Young, 111 Ill. 2d 98 (1986), In re Lenz, 108 Ill. 2d 445 (1985), and In re Clayter, 78 Ill. 2d 276 (1980), to be the most helpful in determining the

proper sanction to be imposed in this case.

	In Young, an attorney commingled and converted funds which were to be used to clear a title defect on property involved in a real

estate transaction. The commingling and conversion occurred

during a period in which “there was a bona fide title problem with respect to his client’s property which justified his retention of the

money.” In re Young, 111 Ill. 2d 98, 104 (1986). This court held that, given the attorney’s lack of dishonest motive, as well as his

lack of prior discipline and extensive pro bono work, censure was the appropriate discipline.

	In Lenz, an attorney commingled and converted client funds when the balance of his client trust account fell below the amount

which he held on behalf of his clients after the attorney wrote a

check against the trust account in order to purchase a wheelchair-

lift-equipped van for another client. Describing this as an isolated

act of misconduct in an otherwise distinguished career, this court

ordered that the attorney be censured.

	Finally, in Clayter, an attorney commingled earnest money which he held for parties to a real estate transaction and converted

the money to his personal use. Clayter deposited the money in a

realty company’s bank account. Thereafter, the balance in that

account fell below the amount of the funds in question on several

occasions. The court concluded that censure was the appropriate

sanction in light of a record which disclosed that the attorney had

acted without dishonest motive; that the respondent had practiced

law for almost 20 years with no other complaints of ethical

infraction; and that he had an outstanding record of involvement in

community service programs.

 	After considering all of the circumstances of this case, we conclude that a censure, as recommended by both the Hearing

Board and by the Review Board, is the appropriate sanction in this

case. We rely most heavily upon the Hearing Board’s finding that

respondent did not act with any fraudulent intent. We have also

considered the other mitigating factors noted by the Hearing

Board.

	For the foregoing reasons, 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. Accordingly, it is ordered that

respondent be censured.

Respondent censured.