Filed November 25, 2008
In re Theresa Lea Jones
Commission No. 07 SH 18
Synopsis of Hearing Board Report and Recommendation
NATURE OF THE CASE: 1) breaching a fiduciary duty; 2) representing a client when the representation of that client will be directly adverse to another client; 3) representing a client when the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person; and 4) engaging in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute.
RULES DISCUSSED: Rules 1.7(a) and (b) of the Illinois Rules of Professional Conduct; and Supreme Court Rule 770.
RECOMMENDATION: Suspension from the practice of law for six (6) months.
DATE OF OPINION: November 25, 2008.
HEARING PANEL: John L. Gilbert, Chair, Arden Lang, Carolyn Berning.
RESPONDENT'S COUNSEL: Bruce L. Carmen.
ADMINISTRATOR'S COUNSEL: Gary S. Rapaport.
BEFORE THE HEARING BOARD
ILLINOIS ATTORNEY REGISTRATION
|In the Matter of:
THERESA LEA JONES,
Commission No. 07 SH 18
REPORT AND RECOMMENDATION OF THE HEARING BOARD
The hearing in this matter was held on three separate days, May 22, July 31, and August 1, 2008, at the offices of the Attorney Registration and Disciplinary Commission, Springfield, Illinois before a Hearing Board Panel consisting of John L. Gilbert, Chair, Arden Lang, lawyer member, and Carolyn Berning, public member. The Administrator was represented by Gary S. Rapaport. The Respondent appeared at the hearing and was represented by Bruce L. Carmen.
Panel Member Arden Lang was not present for the first day of the hearing, May 22, 2008. The parties agreed that the hearing could proceed, and that Panel Member Lang could participate by reading the transcript of the testimony given on May 22, 2008. (Tr. 5-12) Prior to the start of the continued hearing on July 31, 2008, Panel Member Lang read the transcript of the proceedings of May 22, 2008. (Tr. 100-01)
On March 13, 2007, the Administrator filed a two count Complaint against the Respondent.
Count I of the Complaint alleged the following:
In 2005 and several years previously, the Respondent and Gale R. Griffith were close friends who lived together. The Respondent had represented Griffith occasionally in legal matters, such as advising Griffith on tax matters and preparing Griffith's tax returns. Additionally, the Respondent and Griffith, along with four others, owned and operated a business named Crooked House, LLC., which purchased and operated rental properties in the Geneseo, Illinois, area.
In 2005 and several years previously, the Respondent represented Elsie Hamilton and Elsie's niece Janet L. Nelson. In 2005, Elsie was 95 years of age, disabled, and was residing in a nursing home. At that time, Elsie owned a 57-acre farm. Janet Nelson had powers of attorney for the health care and property of Elsie.
In February 2005, the Illinois Department of Human Services (DHS) informed Nelson that, in order for Elsie to be eligible for Medicaid benefits, Elsie was required to sell her farm and exhaust the proceeds of such sale. A DHS caseworker, Debra Booth, informed Nelson that DHS had determined the "value" of Elsie's farm to be $142,825. Also in February 2005, Nelson consulted with the Respondent about selling Elsie's farm. Nelson informed the Respondent of the DHS valuation and stated that the minimum acceptable selling price for the farm was $142,825. Nelson did not obtain an independent appraisal of Elsie's farm, and the Respondent did not advise Nelson to do so. The Respondent knew or should have known that Nelson was not licensed as a real estate broker under Illinois law, and that Nelson could not lawfully receive compensation for acting as Elsie's agent in the transaction.
On about February 28, 2005, the Respondent informed Gale Griffith that Elsie was selling her farm and wanted at least $142,825 for it. Griffith stated she would purchase Elsie's farm for that price, and instructed the Respondent to make an offer on Griffith's behalf to Nelson. On the same date, the Respondent informed Nelson of Griffith's offer, stated that the transaction could be completed "this afternoon," and advised Nelson to accept Griffith's offer.
The Respondent did not disclose to Nelson that the Respondent lived with Griffith; that the Respondent and Griffith were co-owners of a business; that the Respondent represented and provided legal advice to Griffith; that the Respondent's own interests were in conflict with Elsie's interests because of the Respondent's personal and business relationships with Griffith; or that the Respondent's representation of Elsie, as prospective seller of real estate, and the Respondent's representation of Griffith, as prospective purchaser of the same real estate, posed a conflict of interest. Also, the Respondent did not advise Nelson to seek independent legal advice concerning Griffith's offer to purchase Elsie's farm. Additionally, the Respondent did not attempt to obtain a higher offer from Griffith; did not advise Nelson to consider making a counter-proposal to Griffith; or advise Nelson to consider seeking better offers.
Around February 28, 2005, Nelson told the Respondent that Nelson, on behalf of Elsie, would accept Griffith's offer to purchase the farm. The Respondent prepared a closing statement and warranty deed conveying the farmland from Elsie to Griffith. Nelson executed the documents on February 28, 2005. On March 1, 2005,
Griffith obtained a mortgage in the full amount of the purchase price and delivered the funds to the Respondent. The Respondent deposited the funds into her trust account.
Also on March 1, 2005, Griffith drew a check on her personal checking account made payable to Nelson in the amount of $9,995.75, and delivered the check to Nelson. This payment constituted a 7% "agent's commission" to Nelson on the sale of Elsie's farm to Griffith.
In August 2005, Griffith sold the farm she had purchased from Elsie to the F. Allen Ernst Living Trust for $250,000. Griffith had determined to purchase other real estate (Count II) and structured the transaction as a "Section 1031 exchange" under the Internal Revenue Code (26 USC 1031). The Respondent represented and advised Griffith in the foregoing transactions.
Based upon the above, the Administrator alleged that the Respondent committed the following misconduct: (a) she breached her fiduciary duty to Elsie Hamilton; (b) she represented a client if the representation of that client will be directly adverse to another client, in violation of Rule 1.7(a) of the Illinois Rules of Professional Conduct; (c) she represented a client when the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, in violation of Rule 1.7(b); and, (d) she engaged in conduct which tends to defeat the administration of justice, or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 770.
Count II of the Complaint alleged the following:
In 2005 and several years previously, the Respondent and Gale R. Griffith were close friends who lived together. The Respondent had represented Griffith occasionally in legal matters, such as advising Griffith on tax matters and preparing Griffith's tax returns.
Additionally, the Respondent and Griffith, along with four others, owned and operated a business named Crooked House, LLC., which purchased and operated rental properties in the Geneseo, Illinois area.
In 2005, the Respondent represented Howard L. Doy in preparing his income tax returns and, occasionally, in other matters. Doy, 85 years of age, owned a 112-acre farm that included a house and garage. In March 2005, Doy was admitted into Hammond Henry Hospital for extended care. Doy suffered from severe arthritis, diabetes, and other serious ailments. Gale Griffith, a licensed physical therapist employed by Hammond Henry Hospital, had previously provided physical therapy to Doy at his house and then provided physical therapy to Doy at the hospital. Griffith was generally familiar with the property owned by Doy.
In May 2005, Doy and his daughter, Suzann, consulted with the Respondent about selling Doy's farm and house. She agreed to represent Doy as to the sale. Doy told the Respondent that he believed his property was worth $200,000. Doy and Suzann instructed the Respondent to solicit an offer from David J. Dobbels. Dobbels had tenant-farmed the property for about 28 years, and was a friend and neighbor of the Doys. However, the Respondent did not inform Dobbels that Doy was selling his property or that Doy wanted Dobbels to submit an offer to purchase it.
The Respondent informed Griffith that Doy wished to sell his property and that Doy valued the property at $200,000. Griffith stated she would purchase it for that price.
Griffith owned other farmland, the property she purchased from Elsie Hamilton (Count I), which she intended to sell in order to purchase Doy's property. The Respondent advised Griffith how to structure a "Section 1031 exchange" under the Internal Revenue Code to receive certain tax advantages. The Respondent also represented Griffith in the sale of the former Hamilton property.
On about May 23, 2005, the Respondent informed Doy that Griffith offered to purchase his property for $200,000, and she advised him to accept Griffith's offer. Without obtaining an
appraisal of the property, Doy agreed to accept Griffith's offer. The Respondent did not advise Doy to obtain an appraisal of his property; did not attempt to obtain a higher offer from Griffith; did not advise Doy to consider making a counter-proposal to Griffith; did not advise Doy to consider seeking offers higher than Griffith's; did not disclose to Doy that she lived with Griffith or that she and Griffith were co-owners of a business; did not disclose to Doy that she represented and provided legal advice to Griffith; did not disclose to Doy that that the Respondent's own interests were in conflict with Doy's interests because of the Respondent's personal and business relationships with Griffith; did not disclose to Doy that the Respondent's representation of Griffith, as prospective purchaser of Doy's real estate, conflicted with the Respondent's representation of Doy, as prospective seller of the real estate; and the Respondent did not advise Doy to seek independent legal advice concerning Griffith's offer to purchase Doy's property.
On May 23, 2005, the Respondent prepared an "agreement for sale of real estate." The document stated that Doy agreed to sell his property for the amount of $200,000 to an "exchange trust" for the benefit of Griffith. The Respondent presented the document to Doy in his hospital room, and Doy signed it. On July 22, 2005, the Respondent prepared a warranty deed by which Doy conveyed his farm and house to Griffith. The Respondent presented the deed to Doy in his hospital room, and Doy signed it.
Steven L. Carton was a real estate broker who represented the F. Allen Ernst Living Trust, which desired to purchase the former Hamilton property (Count I) from Griffith. In July and August 2005, the Respondent negotiated the purchase with Carton on behalf of Griffith. On August 10, 2005, an agreement was reached that the Ernst trust would purchase the former Hamilton farm from Griffith for $250,000. The Respondent prepared the closing statement and
provided other services. The closing for the sale was on August 31, 2005. Griffith received net proceeds of $104,863.29.
On August 31, 2005, Griffith obtained a new mortgage in the amount of $150,000 to finance her purchase of the Doy property. Griffith delivered the loan amount plus $50,000 to the Respondent. The Respondent deposited the funds into her trust account, and then disbursed amounts to pay various expenses, including her fee of $500.
The Respondent disbursed net proceeds to Doy in the amount of $193,681.06. On August 31, 2005, the deed that Doy executed in favor of Griffith on July 22, 2005, was recorded.
On August 31, 2005, the Geneseo Police Department initiated an investigation into the above transaction between Doy and Griffith. A certified real estate appraiser and broker, Joyce A. Webb, agreed to appraise the property Griffith purchased from Doy. On September 20, 2005, Webb completed the appraisal and concluded that the market value of the foregoing property was $300,000.
Based upon the above, the Administrator alleged that the Respondent committed the following misconduct: (a) breached her fiduciary duty to Howard L. Doy; (b) represented a client when the representation of that client will be directly adverse to another client, in violation of Rule 1.7(a) of the Illinois Rules of Professional Conduct;
(c) represented a client when the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, in violation of Rule 1.7(b); and (d) engaged in conduct which tends to defeat the administration of justice, or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 770.
The Respondent filed an Answer on April 4, 2007. She admitted some of the factual allegations in the Complaint, denied others, and denied all of the allegations of misconduct in Counts I and II.
The Administrator presented the testimony of Gale Griffith, Steve L. Carton, Randy S. Clary, Mark Mosbarger, Dale Doy, Janet Nelson, David J. Dobbels, and Suzann Doy. The Administrator's Exhibits 1 through 32 were received into evidence. (Tr. 13) The Respondent testified in her own behalf and presented the testimony of Gale Griffith. The Respondent's Exhibits 1, 2A through 2L, and 4 were received into evidence. (Tr. 323-24)
Gale Griffith testified she is 48 years of age and is a physical therapist. She is employed by Hammond Henry Hospital in Geneseo and provides in-home health care. She has lived with the Respondent for about nine years. The Respondent owns the home in which they live. Gale described the Respondent as her "significant other," and acknowledged that their relationship "has sexual and romantic components." (Tr. 39, 217-19)
Gale and the Respondent have an ownership interest in Crooked House, a business that is involved in buying and operating rental houses. Crooked House currently owns about 12 to 15 rental houses. The business was started prior to 2005, and both Gale and the Respondent have been involved since its inception. Gale and other co-owners are involved in the buying and selling of property for Crooked House. The Respondent "usually" handles the legal work for Crooked House. (Tr. 40, 233-35, 247)
In early 2005, Gale was looking for a long-term investment, such as real estate. She had been earning $65,000 a year for several years. The Respondent informed Gale that some
farmland, owned by Elsie Hamilton, was available. The price was in the range Gale wanted, and she decided to purchase the Hamilton property. Gale said that it was her intention to keep the property for a long-term investment, and not to resell it. Gale did not know Elsie Hamilton or Janet Nelson before purchasing this property. (Tr. 43-44, 218-190, 223-24, 226, 242-43)
Gale obtained a mortgage for the entire amount of the purchase price of the Hamilton property, $142, 825 (Ad. Ex. 4). This was the first time that Gale had ever obtained a mortgage or purchased real estate in her own name. Gale said that the Respondent did not make any representations regarding the purchase price of the property in relation to the market value. Gale also said she did not intend to take advantage of Elsie Hamilton in purchasing the property. The sale of the Hamilton property to her was completed in March 2005. (Tr. 41-42, 225, 240-42; 246; Adm. Ex. 3 and 4)
Sometime after Gale had purchased the Elsie Hamilton farm, Steve Carton, a realtor, called the Respondent "several times" about Gale selling the former Hamilton farm. Gale said the calls from Carton commenced "within a year, I guess," that is "sometime in July ." During those telephone calls, Carton asked Gale, through the Respondent, to "name a price." Gale initially responded that the farm was not for sale. Finally, Carton called the Respondent at home one evening and again asked about the former Hamilton farm. While he was on the phone, the Respondent yelled to Gale to "just give me a [selling] price." Gale replied to tell him the selling price was $250,000, which she expected to be rejected. She said she had not discussed that selling price with anyone, but "made it up." The Respondent then informed Carton of the price. Within a day or two, Carton called back and said he had a buyer who would pay the $250,000 for the former Hamilton farm. (Tr. 226-30, 244)
On August 10, 2005, Gale signed an agreement to sell the former Hamilton farm to Frederick Allen Ernst, the buyer provided by Carton. (Adm. Ex. 18) Gale said that the telephone calls from Carton, in regard to Gale selling the farm, had commenced about a month before she signed the agreement, that is "sometime in July." (Tr. 242-44, 246)
Gale knew Howard Doy and knew he owned a farm. She had given Howard physical therapy in his home for several weeks in 2005. At some point, Gale learned that Howard was going to an extended care facility and was going to sell his farm. At that time, she was interested in purchasing Howard's farm and making an IRS Section 1031 exchange because she was going to sell the former Hamilton farm. She said the price of Howard's farm was the "exact right price." Gale said that she did not rely on the Respondent "for any legal advice with respect to the Doy purchase." Rather, Gale said that she had another attorney, Stephanie Ames, for the Section 1031 exchange. Later, Gale acknowledged that the other attorney did not provide any legal services to her, except to act as fiduciary for the funds that were involved. (Tr. 42, 230-33, 237-38, 246)
Gale entered into the agreement to purchase Howard Doy's farm on May 23, 2005. (Adm. Ex. 13) She explained that "obviously before that [date] I had decided to sell Elsie's farm," and "decided to buy the Doy property by means of making an IRS exchange." She then said she did not remember the time frame of Steve Carton's telephone calls to the Respondent in regard to selling the Elsie Hamilton farm, "but I know I had intended to sell Elsie Hamilton's farm before I asked to buy Howard Doy's farm, and I am positive of that."
Prior to her purchase of Howard Doy's farm, Gale was not aware that Howard wanted David Dobbels to be given the first chance to buy it. She learned about Dobbels after she had executed an agreement with Howard. Within a week of Gale's agreement with Howard, the
Respondent told Gale that someone else had offered Howard more money for the farm. The Respondent said that Gale "may have to rescind [her] offer or something or let him out of [her] offer." Gale responded, "Okay, if I have to." However, Gale later learned that Howard had rejected the other offer. Gale said she did not think Howard's selling price was unfair to him, but "figured he knew how much his farm was worth." (Tr. 238-41, 248)
Gale said she still owns the former Howard Doy property, even though she has been offered $225,000 for it. She acknowledged that she commissioned an appraisal of the farm by Tim Holmstrom, and that Holmstrom concluded that its market value was $436,800, as of September 28, 2005. (Adm. Ex. 27) In explaining this appraisal, Gale said she had conversations with Holmstrom about how the farm should be appraised, "I wanted to make sure that I could get all the money I needed for it," and "wanted him to appraise it high." (Tr. 254-58)
Janet Nelson testified that she is a retired school secretary and is the niece of Elsie Hamilton, who died in 2006. Janet had power of attorney for Elsie and had managed Elsie's affairs for several years. (Tr. 102-04)
In 2005, Elsie was residing in the Good Samaritan Nursing Home, where she had been placed several years earlier. At that time, Elsie's sight and hearing were very poor, and she "was starting to deteriorate mentally." Also in 2005, Elsie owned a 57-acre farm. (Tr. 103-04)
In early 2005, Janet was concerned that Elsie would have insufficient funds to pay her bills at the nursing home. Someone at the nursing home suggested that Janet contact the Illinois Department of Human Services (DHS) and try to obtain Medicaid benefits for Elsie. Janet contacted DHS and talked with Deborah Booth. Janet inquired about DHS placing a lien on Elsie's property so that it would not have to be sold. While Janet was present, Ms. Booth
telephoned a banker and described Elsie's property to the banker. Following this telephone conversation, Ms. Booth indicated that she was informed the value of Elsie's property was $142,825. (Tr. 107-08, 129, 135-36)
On February 1, 2005, Debra Booth sent a fax with a copy of a DHS memorandum to Janet. The memorandum "recommended" that Elsie's property be sold, and stated that DHS "allows a six month period to sell the property without affecting eligibility." The memorandum also stated that the property "has a value of $142,825." (Adm. Ex. 2, p. 2) The value of Elsie's property was based upon Booth's telephone conversation with a banker, while Janet was present in Booth's office, and no appraisal was obtained. Janet said that, after receiving this memorandum, she believed she had six months to sell Elsie's property. (Tr. 106-09, 129, 135)
Janet said that her experience in buying or selling real estate was previously limited to purchasing her home in 1970 and in selling Elsie's home in 2001 or 2002. Elsie's home was sold in a private sale, without a realtor or attorney. Janet acknowledged that she is not a licensed real estate broker or salesperson. (Tr. 105-06, 118, 125-27)
After receiving the DHS memorandum (Adm. Ex. 2), Janet contacted the Respondent and told her that Elsie's farm needed to be sold. Janet said she spoke with the Respondent by telephone and did not remember if she went to the Respondent's office. The Respondent had represented Elsie in the past. Janet faxed a copy of the DHS memorandum to the Respondent on February 25, 2005. (Adm. Ex. 2, p. 1) Janet denied that she directed the Respondent to sell the property as soon as possible or by March 1, 2005. Near the "end of February," the Respondent called Janet and said the Respondent had a buyer for the property at the price stated in the DHS memorandum, $142,825. The Respondent did not identify the buyer at that time. Janet said the Respondent also mentioned that the sale "had to be done now" because the buyer "had come into
some money, and she needed to invest it as soon as possible." In fact, the Respondent wanted the paperwork "signed the next day." Janet discussed the matter with her brother, and they decided to sell Elsie's property to the buyer referred by the Respondent. (Tr. 110-13, 128, 130, 132-36)
Janet identified the purchase contract, dated February 2005, that the Respondent brought to Janet's house for signature. (Adm. Ex. 3) The contract stated that there would be a "buyer's agent commission of 7%." Janet said that the commission was for her, and that the Respondent had initially brought up the subject of the commission. The Respondent did not say why Janet would be entitled to a commission. Janet explained that "I just thought she was being nice" and "I didn't know any different." (Tr. 114-15)
The closing statement, dated March 1, 2005, for the sale of Elsie's property (Adm. Ex. 4), listed a sale price of $142,825 and, after expenses, the amount of $130,890.75 to be paid to the seller. Janet received the $130,890.75 by way of a check from the Respondent's trust account. (Adm. Ex. 11) Janet deposited the check into Elsie's account and the funds were used to pay Elsie's bills at the nursing home. As a result, Elsie continued to be on "private pay status" until her death in 2006, and Elsie never received Medicaid benefits. Janet, her brother, and a church were the beneficiaries in Elsie's will. (Tr. 115-16)
The closing statement for the sale of Elsie's property also listed an "Agents Commission" of 7%, which totaled $9,997.75. (Adm. Ex. 4) Janet received the $9,997.75 by way of a check from Gale Griffith's bank account. (Adm. Ex. 12) Janet said she did not know why this amount was paid from Griffith's account, rather than from the Respondent's trust account. Janet deposited the $9,997.75 into her own account, and she said she "shared half with my brother." Janet denied having approached the Respondent prior to the closing, and saying Janet wanted
$10,000 for "the services" she had provided to Elsie. Janet acknowledged that the "transaction was actually structured so that [Janet] did not receive a 1099 [form]." Janet indicated she was aware that a 1099 form "would mean you would have to report it to the government for income tax purposes." (Tr. 117-18, 136-37)
Janet testified that the RESPONDENT: did not suggest that Janet attempt to negotiate a higher price with the buyer; did not suggest that Janet seek other offers; did not suggest that neighboring land owners be contacted; did not inform Janet that Griffith was a client of the Respondent; did not inform Janet that the Respondent and Griffith owned a business together; did not inform Janet that Griffith was the Respondent's "housemate," "paramour," "significant other," or "life companion;" did not advise Janet that the Respondent had a conflict of interest as to the transaction; and did not advise Griffith to seek advice from an independent attorney. (Tr. 112, 118-19)
Janet learned of the Respondent's personal and business relationship with Griffith after the Elsie Hamilton property was subsequently sold by Griffith. Janet expressed the view that the Respondent acted improperly in this matter. Janet said "I think she knew [Elsie's farm] was worth more money" than Griffith paid for it. Janet further stated that because of this episode "I don't have much trust in [lawyers]." (Tr. 119-20, 124)
Randy S. Clary
Mr. Clary testified that he is the president of the Central Bank Illinois, located in Fulton, Illinois. He is involved in mortgages and other loans, including agricultural lending. (Tr. 63-65)
In early 2005, Gale Griffith requested a mortgage loan from the bank to purchase 57 acres of farmland. The requested loan amount was $142,825, which was the "full purchase price" of the property. Griffith was a customer of the bank, and Clary was aware of her solid
employment and income record. He had no questions about her "credit worthiness." (Tr. 66, 70-71)
Mr. Clary prepared a memorandum regarding Griffith's loan request. (Adm. Ex. 8) This memorandum was submitted to and reviewed by the bank's loan committee. In the memorandum, Clary stated that Griffith was requesting "100% financing based on the purchase price of $2,500 per acre" and that "current land sales support the price as recent auction farm real estate has fetched $3,500-$4,000 per acre." (Adm. Ex. 8) Clary explained that, while various factors "can play into the actual value" of farmland, he felt the recent values stated in his memorandum provided a "comfort level" for the 100% loan to Griffith. (Tr. 67-69, 71-72)
Finally, Clary acknowledged that he did not obtain an appraisal for the above property. He felt it was unnecessary based upon the price Griffith was paying and the fact that the purchase price was "well within the range of…what it would bring as collateral in case of a default." (Tr. 72)
Steve L. Carton
Mr. Carton testified that he is a licensed real estate broker and has a one-man real estate office in Geneseo. He primarily concentrates in commercial and farm properties. He also serves on the Henry County Tax Appeals Board. (Tr. 45-46)
In the summer of 2005, Alan Ernst approached Carton and inquired about the former Elsie Hamilton farm that had recently been sold to Gale Griffith. Ernst owned a neighboring farm and was interested in purchasing the former Hamilton farm. Carton agreed to act as Ernst's agent and telephoned the Respondent at her office. Carton said he understood from general knowledge in the community that the Respondent represented Griffith. When Carton spoke with the Respondent, he did not disclose the identity of his client because Ernst wanted anonymity at
that time. Carton asked the Respondent if the former Hamilton farm was for sale and, if so, the selling price. Either during their initial telephone conversation or after the Respondent called him back, the Respondent said the property was for sale and that the price was $250,000. (Tr. 46-50, 53-54, 56, 58-59)
Carton informed Ernst of the selling price stated by the Respondent. Ernst made an offer less than $250,000, which Carton conveyed to the Respondent. The Respondent then told Carton that the selling price of $250,000 was firm. Carton relayed this information to Ernst. Within a "day or two," Ernst decided to purchase the property for $250,000. Carton tried to reach the Respondent at her office, but was told she was at a golf outing that day. He then called her at her residence later in the evening and told her of Ernst's offer. Carton explained that Ernst was willing to pay that price, which was $4,375 an acre, because he "thought it was a fair price." (Tr. 50-53, 61)
Carton said that the paperwork relating to the agreement to purchase the former Hamilton property was prepared on the day after his evening telephone call to the Respondent. The paperwork was signed and Carton delivered Ernst's earnest money check to the Respondent. (Tr. 51)
Carton denied calling the Respondent at her home and at her office "on more than one occasion seeking to solicit a price for the sale of this farm." He said he had "two or three" telephone conversations with the Respondent about this matter, and only called her residence on one occasion, which was the day of the golf outing. (Tr. 51-53)
Mr. Carton explained that prices for farm land can "vary quite widely," and that a "lot of different factors go into the pricing of farm real estate." He further explained that frequently
farmers are interested in purchasing neighboring or nearby farmland and "might pay more to acquire a bordering land." (Tr. 48-49, 57-62)
Suzann Doy testified that she is the daughter of Howard Doy. She resides in Chicago and is a retired nurse. She grew up on a 112-acre farm in Henry County
purchased by Howard in 1958. (Tr. 175-78)
Howard Doy stopped farming the 112-acre farm "many years" ago and then rented it to David Dobbels. Dobbels was also a neighbor. Howard continued to live in the house on the farm after his wife died in 1996. Suzann described Howard as a very independent person who took care of himself. Howard died in May 2006. (Tr. 176, 178-79)
In early 2005, Howard got sick, and had a home health care nurse looking after him. In late March 2005, Howard could no longer live at the farm, and he went to a hospital. Suzann had stayed with Howard for almost a month before he went into the hospital. She said Howard was still "very well" mentally, and he took care of his own finances. From the hospital, Howard went to an extended care facility connected to the hospital. (Tr. 179-81, 204)
Also in early 2005, Suzann went to the Respondent's office in regard to Howard's tax return. The Respondent was Howard's lawyer and prepared his tax returns. At that time, the Respondent asked Suzann if Howard was going to be selling his farm. The Respondent also said that occasionally people ask her if there is property for sale. Suzann replied that she would relay the message to Howard. (Tr. 181-82, 212)
In May or June 2005, Howard told Suzann that he was ready to sell his farm. He directed Suzann to contact the Respondent, and to tell her to call David Dobbels and give Dobbels the opportunity to make the first offer. Suzann then met with the Respondent and told her what
Howard had said. Specifically, Suzann said she told the Respondent about Howard wanting Dobbels to have the first chance at buying the farm. The Respondent said fine and that she would talk with Howard. (Tr. 181-85, 204-05)
Suzann said that when she spoke with the Respondent, Suzann suggested a selling price of $225,000. Later, the Respondent spoke with Howard, and he indicated the selling price was $200,000. At some point, the Respondent brought up the question of whether there should be an appraisal of Howard's farm. However, before Suzann could answer, the Respondent said "farmers know their price of their land" and an appraisal "won't be necessary." (Tr. 182-83, 185-87, 209, 213-14)
Subsequently, the Respondent met with Howard at the hospital without Suzann being present. After this meeting with the Respondent, Howard informed Suzann that he told the Respondent to contact David Dobbels and give him first chance to purchase the farm. Suzann said that, as far as she knew, Howard never changed his mind about first offering the farm to Dobbels. (Tr. 184, 186, 206-09)
Suzann said she learned from either the Respondent or Howard that the farm had been sold. Suzann did not know who had purchased the farm, but she knew that Dobbels had not purchased it. On a Saturday in July 2005, Suzann and the Respondent were at the house on the farm when Dobbels arrived. Suzann introduced the Respondent to Dobbels, and then told Dobbels that the farm had been sold. Suzann said that Dobbels became "very red in the face" and "very upset," and then left. After Dobbels left, Suzann asked the Respondent if she had talked with Dobbels about purchasing the farm. The Respondent replied that she had not. Suzann did not inquire further about the matter, and the Respondent did not provide any explanation. (Tr. 186-89, 202-03, 205-06, 209-10)
Subsequently, Suzann was present when the Respondent visited Howard. The Respondent told him that Dobbels was upset about not getting Howard's farm. The Respondent asked Howard if he would be interested in buying the farm back from the buyer for $224,000, and then selling it to Dobbles for $225,000. Howard rejected this proposal, saying that the farm had already been sold. Suzann acknowledged that she received a letter from the Respondent, shortly after July 21, 2005, in which the Respondent stated that Dobbels had offered $225,000 for Howard's farm on July 18, 2005 and that she relayed the offer to Howard (Resp. Ex. 1). (Tr. 190-92, 210-11)
Later, Howard told Suzann that he was disappointed Dobbels did not get the farm because he "really wanted Dave to have first choice, and … was hoping that he would buy the farm or have the opportunity." (Tr. 199-200)
Sometime after the sale of Howard's farm, Suzann learned that the buyer was Gale Griffith. However, Suzann did not know Griffith and had not heard her name before. Suzann did not find out until "much later" that Griffith was a business associate, housemate, and client of the Respondent. (Tr. 192-94, 197-98, 203)
Howard invested the funds he received from the sale of his farm into certificates of deposit or mutual funds. The funds were on deposit at the time of Howard's death in May 2006. Under Howard's will, Suzann and her brothers and sisters were beneficiaries. The Respondent was hired as the attorney for the probate estate. Suzann had no objection to the way the Respondent handled the estate. (Tr. 176, 195-97, 212-13)
Finally, Suzann said that, based on this episode, she "learned not really to trust [lawyers] and to second guess them as far as what are they doing." (Tr. 198)
Dale Doy testified that he is the son of Howard Doy. Howard died in May 2006. Dale has lived in Colorado since 1976. Dale said he telephoned Howard about once a week and visited him two or three times a year. (Tr. 83-84)
In 2005, Howard was admitted to a hospital and then placed in long-term care. Dale's sister, Suzann, handled matters regarding Howard's care. When Howard was in the hospital, he indicated it was time for him to sell his farm. Dale said that, for "many years," Howard said he "would like Dave Dobbels to have the first right to buy [the farm]." As far as Dale knew, Howard never changed his mind as to Dobbels. Dale also said he had not previously seen the letter dated July 21, 2005, from the Respondent to Dobbels (Resp. Ex. 1). (Tr. 84-87)
Dale was one of the beneficiaries of Howard's estate. The Respondent was the attorney for the estate, which has been closed. (Tr. 88-89)
David J. Dobbels
David Dobbels testified that he is 58 years of age and resides in Cambridge, Illinois. He farms, cares for cattle, is a consultant for John Deere Crop Hail Insurance, has been a township supervisor for 15 years, and is the chairman of the Henry County Republican Party. (Tr. 138-39, 159-60)
Dobbels was a tenant farmer at Howard Doy's 112-acre farm for about 28 years, commencing in 1977. Over the years, Dobbels discussed with Howard Doy his interest in purchasing the farm. Dobbels said it was his understanding that he and Howard "had a verbal agreement in the event the farm became available for sale…[Dobbels] would be given first chance to purchase the farm." The last conversation Dobbels had with Howard in this regard was in June 2004, when Howard was about 80 years of age. During this June 2004 conversation,
Howard indicated his asking price for the farm would be $150,000. Dobbels told Howard that price was too low, and that Dobbels' would pay $180,000 for the property. Howard then indicated he "would let it go up to auction." And Dobbels said, "if you change your mind, I would like first chance." Howard replied that "he would give [Dobbels] that." Dobbels was not aware of Howard's ever changing his mind about giving Dobbels the first chance to purchase the farm. (Tr. 139-46, 162-64)
In July 2005, Howard Doy was in the Hammond Henry Hospital, and had been there for more than 30 days. On a Saturday in July 2005, Dobbels was at Howard's farm when he saw Suzann Doy, Howard's daughter, and the Respondent. Suzann introduced Dobbels to the Respondent, and told him that the farm had been sold. He had not been previously contacted about the sale of the farm. After Suzann told him the farm had been sold, Dobbels replied, "I didn't think the farm could be sold, because I hadn't been contacted yet." (Tr. 146-48, 165, 170-71)
On the following day, a Sunday, Dobbels visited Howard at the hospital. Howard told Dobbels the farm had been sold. Dobbels said that Howard's comments "led me to believe that I had been contacted and showed no interest in purchasing the farm." (Tr. 148-51, 166)
Dobbels telephoned the Respondent the next day, Monday, and asked her if it was her "common practice to ignore the wishes of your client," in that he "was never given an opportunity to purchase the farm." Dobbels also told the Respondent that he would pay $225,000 for the farm. The Respondent said she would take Dobbels offer to Howard, but that "she didn't think it would do much good because the papers were signed." The Respondent did not subsequently contact Dobbels about this matter. (Tr. 151-54, 166-67, 172, 174)
Dobbels said he did not receive a letter (Resp. Ex. 1) from the Respondent on or about July 21, 2005. He said the first time he saw that letter was when he received a copy of it from the ARDC in about January 2007. (Tr. 154-55, 167-69)
Finally, Mr. Dobbels said that a "few months" after July 2005, he contacted realtor Steve Carton and asked him to find out if the former Doy property was for sale and the selling price. (Tr. 155-56)
Mr. Mosbarger testified that he is a loan officer at Central Bank Illinois, located in Geneseo. He has been in "agricultural lending for over a decade." (Tr. 74-75, 81)
In the summer of 2005, Gale Griffith contacted the bank to obtain a mortgage loan for farm property she was purchasing from Howard Doy. The purchase price was $200,000 and the loan amount was $150,000. (Tr. 75-76)
Mr. Mosbarger prepared a memorandum regarding Griffith's loan for the bank's loan committee. (Adm. Ex. 21) In the memorandum, he stated that an "in-house evaluation of the property was conducted" and that the "value of the property is conservatively estimated at $3,000 per acre, for a total value of $336,000." Mosbarger explained that the in-house evaluation was based on "what generally was understood to be farm values in that area." (Tr. 76-78, 81)
Mr. Mosbarger also wrote in his memorandum that Griffith "is an excellent customer of Central Bank" and her "income is more than sufficient to support this loan request." (Tr. 79-81; Adm. Ex. 21)
Finally, Mr. Mosbarger acknowledged that "farm values can vary quite widely." (Tr. 81)
The Respondent testified that she is 44 years of age and resides in the City of Geneseo. She lives with her "life partner" Gale Griffith, with whom she has an "exclusive romantic relationship." She and Gale maintain their finances separately. The Respondent owns the home in which they live, and Gale pays some of the bills. (Tr. 261, 265-66)
The Respondent became licensed to practice law in 1989. She then began working with attorney Robert White in Geneseo. She became his partner in about 1991. Mr. White retired in 1995 and died in 1997. The Respondent has retained the name of White and Jones Law Office, and practices law as a sole practitioner. Her practice primarily involves tax work, real estate matters, and estate planning. She sometimes handles other matters for her clients. About 30 to 40% of her practice pertains to real estate. Her office also prepares about 300 to 350 tax returns each year, and about 25% of them are for farmers. She has three full-time secretaries and two part-time employees. Her part-time employees work full-time during tax season. The Respondent's employees prepare Gale Griffith's tax returns, although the Respondent is not "personally" involved in Gale's taxes. The Respondent described her law practice as successful. (Tr. 261-65, 267, 275-74, 312, 314)
The Respondent mentioned various community organizations in which she has been active. These organizations include the Chamber of Commerce, the Good Shepherds Foundation, The Kiwanis, Big Brother-Big Sister, the advisory panel of a hospital for health and elder care, and the Geneseo Economic Development Committee. She also served in the United States Army Reserves for four years. (Tr. 262, 301-02)
The Respondent, Gale Griffith, and four other women own a business named Crooked House. Crooked House was started in 2003; it buys and rents houses in the Geneseo area. As of
December 2006, Crooked House owned about 15 to 20 houses. Crooked House has also purchased houses and then tried to sell them quickly to make a profit. The Respondent handles the legal work for the real estate transactions of Crooked House. (Tr. 266, 315, 317-18, 321)
During the course of her law practice, the Respondent has represented sellers or buyers of agricultural real estate. She said that the attorney for the seller has no obligation to get involved with the issue of price, unless there is something "glaringly wrong." Also, she said she may suggest an appraisal for estates to prevent family members from raising questions later. (Tr. 266-68)
The Respondent said that farm prices vary widely from farm to farm. Prices are affected by the type of soil and the production. When a farm comes up for sale, the tenants and neighbors often drive up the prices. The Respondent discussed examples of the differing selling price of various farm properties, as set out in Respondent's Exhibit 2A through 2L. (Tr. 269-73)
Count I (Elsie Hamilton Farm)
Elsie Hamilton was one of the Respondent's clients. The Respondent or her employees prepared Elsie's tax returns. Elsie had a "sight problem," and the Respondent or her secretary wrote checks for Elsie to sign and assisted Elsie in other matters. By 2003, Elsie's niece, Janet Nelson, was handling matters for Elsie. (Tr. 274-75)
When Elsie went to a nursing home in 2003, Janet discussed with the Respondent the selling of Elsie's house. The house was sold to a man named John DuBois, who worked at Central Bank. Janet did not obtain an appraisal or list the house with a realtor. The price was determined by a "call market analysis," which realtors "used to do … for free or for a very small price as opposed to an appraisal." The Respondent was the attorney for the sale of Elsie's house. (Tr. 276-78)
By 2005, Elsie's funds were running low, and Janet discussed with the Respondent the possibility of Elsie receiving Medicaid benefits. Janet then contacted the Illinois Department of Human Services (DHS) and inquired about Medicaid. On February 25, 2005, Janet called the Respondent and told her that DHS wanted Elsie's farm sold and that Janet wanted it sold by March 1, 2005. Janet faxed the Respondent a letter from DHS in which DHS stated that Elsie's farm had "a value of $142,825." (Adm. Ex. 2) The Respondent said she had no reason to doubt the accuracy of the value stated by DHS. (Tr. 278-80, 283)
The Respondent said that Janet and she discussed listing Elsie's farm with a realtor and holding an auction. The Respondent also mentioned that she had some clients who owned neighboring property, and that they might be interested. Janet again stated that she wanted the farm sold by March 1, 2005. The Respondent was aware that Gale Griffith had voiced an interest in purchasing some farmland. The Respondent then told Gale about the Elsie Hamilton farm and the DHS statement that the farm had a value of about $142,000. Gale was interested in purchasing the farm and thought she could obtain necessary financing. The Respondent informed Janet that Gale would purchase Elsie's farm, Janet discussed it with her brother, and Janet agreed to sell the farm to Gale for the price stated by DHS. (Tr. 280-84)
The Respondent acknowledged that she did not tell Janet about the Respondent's relationship with Gale. The Respondent said she did tell Janet that the Respondent, Gale, and others were in a group which purchased residential real estate. At this time, the Respondent was preparing tax returns for Gale (Adm. Ex. 7). (Tr. 284-85, 318-20)
The Respondent also testified that after the contract was prepared for Gale to purchase Elsie's farm, Janet "sought to receive some money." Janet "had helped Elsie a lot" and she "wanted some money." The Respondent was aware that a fiduciary was entitled to receive a
reasonable amount for services rendered. She advised Janet that Janet would have to "determine what a reasonable amount is" and that Janet "could get paid and we would issue a 1099 from our office … and she would pay tax on that money." The Respondent also informed Janet that, if payment came out of the Respondent's trust account, Janet would get a form 1099. However, Janet "didn't really like that idea very much," and "asked if Gale would write her a check for that." (Tr. 285-86)
Following Gale's purchase of the Elsie Hamilton farm (on March 1, 2005), realtor Steve Carton telephoned the Respondent and asked if the farm was for sale. This call came "within a week" of Gale's purchase. Gale said she was not interested in selling the farm, and the Respondent so informed Carton. Carton continued to call and inquire about Gale selling the former Elsie Hamilton farm. Finally, Carton telephoned the home of the Respondent and Gale. He asked the Respondent to give him a selling price. Gale then gave the selling price of $250,000. Carton laughed at that price, but called back and said Alan Ernst would purchase the farm at that price. Carton presented an agreement (Adm. Ex. 18) to Gale "much later." The closing for Ernst's purchase of the farm from Gale was on August 30, 2005. (Tr. 287-91, Adm. Ex. 20)
Count II (The Howard Doy Farm)
The Respondent said "sometime after Gale agreed to sell the [former Elsie Hamilton] farm to Alan Ernst" the transaction pertaining to the Howard Doy farm "came about." (Tr. 291)
Some of Howard Doy's children, including Suzann Doy, met with the Respondent. They told her that Howard had decided to sell his farm, wanted $200,000 for the farm, and wanted David Dobbels to have the first opportunity to purchase it. The Respondent then went to talk with Howard, who was in the hospital. The Respondent said that Howard was lucid and
understood what he was doing. Howard told her that he wanted to sell his farm for $200,000 and wanted David Dobbels to buy it. The Respondent left the hospital, but returned later to talk with Howard about selling the car and other items. When she returned, Howard asked her if she had spoken with Dobbels. She said no. Howard then said that he had talked to Dobbels and that Dobbels had offered only $180,000 for the farm. She asked if Howard wanted her to talk with Dobbels, and Howard said no. She suggested contacting other people about purchasing the farm, and Howard agreed. (Tr. 292-95)
The Respondent called a couple of people who lived near Howard's farm. One person was not interested and the other person was on vacation. The Respondent then mentioned Howard's farm to Gale. At that time, Gale was talking about selling to Alan Ernst the farm she purchased from Elsie Hamilton. Thus, the purchase of Howard's farm "would work excellent" for "trade purposes" under Section 1031 of the Internal Revenue Code. Gale ultimately purchased Howard's farm for $200,000. The closing was on August 30, 2005 (Adm. Ex. 28). The Respondent said she represented Howard Doy for the sale, and Gale was represented by attorney Stephanie Ames. The Respondent acknowledged that she did not inform Howard of her relationship with Gale. (Tr. 296-98)
After Gale had entered into an agreement to purchase Howard Doy's farm, the Respondent and Suzann Doy were at the farm on a Saturday. David Dobbels arrived, and Suzann told him that the farm had been sold. He replied "oh, really," and then left. On the following Monday, Dobbels telephoned the Respondent at her office. Dobbels yelled at her and said he wanted Howard's farm. The Respondent asked what he was willing to pay for the farm, and Dobbels said $225,000. The Respondent told Dobbels that she would talk with Howard and see if she could "fix this." The Respondent then "said something to [Gale] about it, if she would
be willing to "break the contract with Howard." The following day, the Respondent went to the hospital and spoke with Howard. She told Howard about Dobbels offer to pay $225,000 for the farm, and told him about "different options." She told him that Gale might break the contract, or that Howard could give the extra $25,000 to Gale to break the contract so that Dobbels could acquire the farm. However, Howard declined to alter his contract with Gale, and the farm was sold to Gale for $200,000. (Tr. 298-301, 309-11; Resp. Ex. 1)
The Respondent acknowledged that when she discussed with Gale Griffith and then with Howard Doy breaking the contract to purchase the Howard Doy property, she was in a conflict of interest situation. She did not advise Howard to talk with another lawyer. (Tr. 311-12)
Finally, the Respondent said that she did not take advantage of, cheat, or defraud Elsie Hamilton or Howard Doy. The Respondent also said she did not personally profit from the transactions involving Elsie and Howard, except to obtain attorney fees. (Tr. 308)
There was a stipulation that three witnesses would give favorable character testimony on behalf of the Respondent. (Tr. 324; Resp. Ex. 4) Circuit Court Judge Larry S. Vandersnick would testify that the Respondent "has always comported herself in his courtroom consistently with the highest ethical standards of the profession, and that her personal and professional reputations in the legal and real estate communities are excellent." Betty Brudos, a real estate professional in Geneseo, would testify that she has been involved in numerous real estate transactions with the Respondent, and the Respondent "enjoys an excellent reputation for honesty and professionalism in the real estate community." Finally, Debra Walker, an attorney and partner in a Chicago law firm, would testify that she has known the Respondent since law school, and that the Respondent "has always enjoyed an excellent reputation for honesty and professionalism." (Resp. Ex. 4)
FINDINGS OF FACT AND CONCLUSIONS OF LAW
In attorney disciplinary proceedings, the Administrator has the burden of proving the charges of misconduct by clear and convincing evidence. In re Storment, 203 Ill. 2d 378, 390, 786 N.E.2d 963, 969 (2002). This standard requires a high level of certainty, greater than a preponderance of the evidence but less than proof beyond a reasonable doubt. Bazydlo v. Volant, 164 Ill. 2d 207, 213, 647 N.E.2d 273, 276 (1995).
In deciding whether the burden of proof has been satisfied, it is the responsibility of the Hearing Panel to determine the credibility and believability of the witnesses, weigh conflicting testimony, draw reasonable inferences from the evidence, and make factual findings based upon all the evidence. See In re Timpone, 157 Ill. 2d 178, 196, 623 N.E.2d 300, 308 (1993); In re Howard, 188 Ill. 2d 423, 435, 721 N.E.2d 1126, 1133 (1999). The Hearing Panel is in a position to judge credibility and weigh conflicting testimony because it is able to "see the witnesses [and] observe their demeanor." In re Samuels, 126 Ill. 2d 509, 526, 535 N.E.2d 808, 814 (1989); In re Spak, 188 Ill. 2d 53, 66, 719 N.E.2d 747, 754 (1999). In assessing the evidence the Hearing Panel is not required to be "naïve or impractical" or to believe testimony that is "beyond human experience," "an unreasonable story," or "an inherent improbability." In re Discipio, 163 Ill. 2d 515, 523-24, 645 N.E.2d 906, 910 (1994); In re Holz, 125 Ill. 2d 546, 555, 533 N.E.2d 818, 821 (1989); Tepper v. Campo, 398 Ill. 496, 504-05, 76 N.E.2d 490, 494 (1948). Also, a finding of misconduct can be based upon circumstantial evidence (In re Holz, 125 Ill. 2d at 557, 533 N.E.2d at 822).
Additionally, an admission in a pleading is a formal judicial admission that is binding on the party making it, may not be contradicted, has the effect of withdrawing the fact admitted from issue, and dispenses with the need for any proof of that fact. Thus, when a respondent in a
disciplinary matter admits in his or her answer some or all of the facts alleged in a complaint, it is unnecessary for the Administrator to present evidence to prove the facts so admitted. See In re Carlson, 98 CH 880, M.R. 17398 (June 20, 2001) (Hearing Board Report at 11); In re Cagle, 05 SH 23, M.R. 21355 (March 19, 2007) (Hearing Board Report at 35); In re Petit, 06 SH 30, M.R. 21735 (September 18, 2007) (Hearing Board Report at 15).
With the above principles in mind, and after considering all of the evidence, we find, as set out below, that the Administrator proved all of the misconduct charged in the Complaint.
It is well established that an attorney has a fiduciary relationship with and owes undivided loyalty to each person he or she represents. A "conflict of interest arises whenever an attorney's independent judgment on behalf of a client may be affected by a loyalty to another party." This is a "rigid rule" and does not require proof that the attorney's "professional judgment was actually compromised." In re La Pinska, 72 Ill.2d 461, 469, 381 N.E.2d 700, 703 (1978); In re Rosin, 118 Ill.2d 365, 381, 515 N.E.2d 85, 93 (1987); In re Daley, 98 SH 2, Review Board Report at 13 (Petition to file exceptions to Review Board Report denied in M.R. 17023, November 27, 2000).
It is also well established that an attorney has a conflict of interest by representing a client in a real estate or other financial transaction while, at the same time, having a loyalty to the other party to the transaction. See In re Twohey, 191 Ill.2d 74, 89, 727 N.E.2d 1028, 1036 (2000); In re Chernoff, 91 Il.2d 316, 320, 323-24, 438 N.E.2d 168, 170, 172 (1983); In re Gearhart, 05 SH 19, Review Board Report at 11-13 (Petition for leave to file exceptions to Review Board Report denied in M.R. 21335, March 19, 2007); In re O'Donnell, 04 CH 115, Hearing Board Report at
9-12 (Hearing Board Report affirmed by Review Board; Petition to file exceptions to Review Board Report denied in M.R. 22181, March 17, 2008).
The evidence, including the Respondent's admissions in her Answer, showed that the Respondent represented Elsie Hamilton in the sale of Hamilton's 57-acre farm during February and early March 2005. Hamilton's niece, Janet Nelson, who had power of attorney for Hamilton, retained the Respondent in regard to the sale of Hamilton's farm. (Tr. 104, 110-11, 278-79) Nelson faxed to the Respondent a copy of a letter from the Illinois Department of Human Services, in which it was stated that Hamilton's farm had a "value of $142,825." (Adm. Ex. 2; Tr. 107-08) The Respondent then told Gale Griffith the Hamilton farm was for sale and had a value of $142,825. (Tr. 223-24, 282-84) Griffith agreed to purchase the farm for $142,825. Griffith was able to obtain a loan for 100% of the purchase price. (Tr. 66, 225) The Respondent informed Nelson that the Respondent had found a buyer willing to pay $142,825 for the Hamilton farm. Nelson agreed to the sale, and the closing took place on March 1, 2005. (T. 111-13, 282-84) The Respondent prepared the closing statement and the deed. (Adm. Ex. 4 and 5)
At the same time the Respondent was representing Elsie Hamilton in the sale of Hamilton's farm to Gale Griffith, the Respondent also had a personal, financial, and professional relationship with Griffith. The Respondent lived with and had a romantic relationship with Griffith for several years. (Tr. 39, 217, 265) In fact, the Respondent described Griffith as her "life partner." (Tr. 265) Also, since 2003 the Respondent and Griffith were co-owners, with four others, of a business named Crooked House. Crooked House purchased houses and then operated them as rental properties. (Tr. 40, 23-34, 247, 317-18) On a "few" occasions, Crooked House purchased houses and then tried to sell them for a profit. (Tr. 234, 317-18) The Respondent
handled the "legal work" for Crooked House. (Tr. 40, 235, 321) Additionally, the Respondent, or someone in the Respondent's law office, prepared Griffith's tax returns for, at least, the years 2002, 2003 and 2004. (Tr. 274, 318-19; Adm. Ex. 7) The 2004 tax return was prepared prior to March 15, 2005. (Tr. 319) Finally, on March 15, 2005, the Respondent, acting on behalf of Griffith, faxed financial information to Central Bank in regard to Griffith's application for a mortgage on the farm purchased from Elsie Hamilton. (Tr. 318-19; Adm. Ex. 7)
Based upon the clear and convincing evidence, the Respondent had a conflict of interest in regard to the sale of Elsie Hamilton's farm. On the one hand, the Respondent represented Hamilton and had a fiduciary duty toward her. Her fiduciary duty included "undivided fidelity," which means not only loyalty and duty of care, but also "a duty to avoid conflicts of interest." In re Winthrop, 219 Ill. 2d 526, 543-44, 848 N.E.2d 961, 972-73 (2006); In re Vrdolyak, 137 Ill. 2d 407, 422-24, 560 N.E.2d 840, 845-46 (1990); In re O'Donnell, 94 CH 115, Hearing Board Report at 10 (Hearing Board Report affirmed by Review Board; petition to file exceptions to Review Board Report denied in M.R. 22181, March 17, 2008). On the other hand, the Respondent had a close relationship with the purchaser of Hamilton's farm, Gale Griffith. The Respondent and Griffith were "life partners;" they had a joint financial interest in a business; and the Respondent had an ongoing attorney-client relationship with Griffith in regard to Griffith's tax returns and the Respondent's legal work for their business. Thus, the Respondent had loyalties and fiduciary duties toward both parties of the sale transaction.
The conflicting interests of a buyer and seller are obvious. It is in the seller's interest to sell the property at the highest possible price, and it is in the buyer's interest to purchase the property at the lowest price possible. Consequently, there are frequently negotiations during the process of the sale of real estate. The Respondent's involvement in the sale of Hamilton's farm
to Griffith was a clear conflict of interest, which the Respondent, or any attorney, should have recognized.
The Supreme Court, in discussing conflict of interest, has stated the following:
An attorney must not, of course, decide unilaterally whether the circumstances justify his accepting employment despite a conflict of interest. He may not proceed to represent his client without her free, intelligent, and informed consent. He must make sure she knows and understands the conflict and the threat it poses to the attorney's objectivity, and any other considerations material to the client's decision whether to entrust her affairs to the attorney. He must also take suitable precautions to minimize the dangers and disadvantages to the client of his double role, including the risk that the attorney's advice about the initial decision to proceed despite the conflict may itself be biased. And for his own protection, he should be prepared to prove later what really happened.
In re Barrick, 87 Ill. 2d 233, 239, 429 N.E.2d 842, 846 (1981).
The evidence clearly and convincingly proved that the Respondent did not disclose to Elsie Hamilton or to Janet Nelson the Respondent's personal, financial, or professional relationship with Gale Griffith, at any time during the sale of Hamilton's farm. Likewise, the evidence proved that the Respondent did not otherwise advise Hamilton or Nelson of the Respondent's conflict of interest or advise them to seek advice from independent counsel. (Tr. 118-20, 284-85; Respondent's Answer, par. 12-16) Further, neither Hamilton nor Nelson effectively waived the conflict of interest.
Finally, an attorney who has a conflict of interest in a real estate or other financial transaction breaches his or her fiduciary duty and engages in conduct that tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute. See In re Twohey, 191 Ill.2d at 84-85, 727 N.E.2d at 1033; In re Gearhart, 05 SH 19, Review Board Report at 1, 11-12, 14 (Petition to file exceptions to Review Board Report in M.R. 21335, March 19, 2007); In re Murzyn, 05 CH 73, M.R. 2143 (March 19, 2007); (Petition to Impose Discipline on Consent, p. 1-3).
Therefore, we find that the Administrator proved by clear and convincing evidence that the Respondent committed the following misconduct charged in Count I: (a) breach of fiduciary duty; (b) represented a client where the representation of that client is directly adverse to another client, in violation of Rule 1.7(a) of the Illinois Rules of Professional Conduct; (c) represented a client where the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, in violation of Rule 1.7(b); and (d) engaged in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 770.
Based upon the authority cited in Count I, above, we find that the Respondent had a conflict of interest while representing Howard Doy in the sale of his farm to Gale Griffith during the period of May through August, 2005.
The evidence established that the Respondent represented Howard Doy in the sale of Doy's 112-acre farm. Her representation commenced in May 2005 (Tr. 181-83; Adm. Ex. 13), and continued until, at least, the real estate closing on August 30, 2005. (Tr. 182-83, 294) Doy informed the Respondent that he wanted to sell his farm for $200,000 (Tr. 182-83, 294) and that he wanted David Dobbels, the tenant on the farm, to have the first opportunity to purchase it. (Tr. 183, 185-86, 207, 292) The Respondent testified that Doy later told her that Dobbels offered only $180,000 for the farm, and directed her to contact others about purchasing the farm. (Tr. 295) The Respondent contacted Gale Griffith, and Griffith purchased Doy's farm for $200,000 on August 30, 2005. (Tr. 296-97; Adm. Ex. 13, 28)
During the time the Respondent was representing Howard Doy in the sale of his farm to Gale Griffith, the Respondent also had a personal, financial and professional relationship with Griffith, as described in Count I, above. Additionally, the Respondent acted on behalf of Griffith during the sale of the former Hamilton farm by Griffith to Allen Ernst in August 2005. For example, the earnest money paid to Ernst was escrowed with the Respondent on about August 10, 2005 (Adm. Ex. 18); the Respondent prepared an insurance commitment form on about August 18, 2005 (Adm. Ex. 19); and the Respondent prepared the closing statement for August 30, 2005 (Adm. Ex. 20). Further, in September 2005, the Respondent sent correspondence and documents to Central Bank on behalf of Gale Griffith. (Adm. Ex. 29, 30)
In addition to the above, the Respondent spoke with both Griffith and Doy about breaking their contract after David Dobbels offered to purchase Doy's farm for $225,000. The Respondent talked with Griffith about "breaking the contract. (Tr. 300, 311) The Respondent then discussed some options with Doy, such as selling the farm to Dobbels for $225,000 and giving Griffith $25,000 "to break the contract." She also told Doy that Griffith "may back out gracefully." (Tr. 300, 310) The Respondent acknowledged that she was in a conflict situation when she spoke with Griffith and then Doy about this matter. (Tr. 311)
Based upon the clear and convincing evidence, the Respondent had a conflict of interest when she represented Howard Doy, the seller of real estate, and at the same time had a personal, financial and professional relationship with Gale Griffith, the purchaser of Doy's real estate.
The evidence and the Respondent's admissions established that she did not sufficiently disclose her relationship with Gale Griffith or her conflict of interest to Howard Doy. (Tr. 193-94, 197-98, 297-98, 311-12; Respondent's Answer, par. 18-22) Also, Doy did not waive the conflict of interest.
Therefore, we find that the Administrator proved by clear and convincing evidence that the Respondent committed the following misconduct charged in Count II:
(a) breach of fiduciary duty; (b) represented a client where the representation of that client is directly adverse to another client, in violation of Rule 1.7(a) of the Illinois Rules of Professional Conduct; (c) represented a client where the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, in violation of Rule 1.7(b); and (d) engaged in conduct which tends to defeat the administration of justice or to bring the courts or the legal profession into disrepute, in violation of Supreme Court Rule 770.
The purpose of the attorney disciplinary system is not to punish an attorney for misconduct, but rather "to protect the public, maintain the integrity of the legal profession, and protect the administration of justice from reproach." In re Winthrop, 219 Ill. 2d 526, 559, 848 N.E.2d 961, 981 (2006). In determining the appropriate sanction, we are to consider the nature of the misconduct as well as the aggravating and mitigating factors. In re Gorecki, 208 Ill. 2d 350, 360-61, 802 N.E.2d 1194, 1199-1200 (2003). In addition, we may consider the deterrent value of the sanction, the "need to impress upon others the seriousness of the misconduct at issue," and whether the sanction will help preserve public confidence in the legal profession." In re Twohey, 191 Ill. 2d 75, 85, 727 N.E.2d 1028, 1034 (2000); In re Gorecki, 208 Ill. 2d at 361, 802 N.E2d at 1200.
Although each disciplinary case "is unique and must be resolved in light of its own facts and circumstances," the sanction imposed should be "consistent with those imposed in other
cases involving comparable misconduct." In re Howard, 188 Ill. 2d 423, 440, 721 N.E.2d 1126, 1135 (1999); In re Chandler, 161 Ill. 2d 459, 472, 641 N.E.2d 473, 479 (1994).
In this matter, the Administrator requested the sanction of suspension for a period of one year. (Tr. 325, 353) The Respondent requested a censure or, "at the very worst," a short suspension of between 30 and 60 days. (Tr. 377, 379)
The Respondent's misconduct in this case occurred in two real estate transactions in 2005. She had a conflict of interest and breached her fiduciary duty to Elsie Hamilton by representing Hamilton in the sale of Hamilton's farm to Gale Griffith, with whom the Respondent had a personal, financial, and professional relationship. (Count I) Similarly, the Respondent had a conflict of interest and breached her fiduciary duty to Howard Doy by representing Doy in the sale of Doy's farm to Gale Griffith, with whom the Respondent had a personal, financial, and professional relationship. (Count II) Also, the Respondent failed to disclose her relationship with Griffith or explain her conflicting interests to either client.
There are several factors in mitigation and aggravation to be considered in determining the appropriate sanction in this matter.
In mitigation, the Respondent has practiced law since 1989 and has not been previously disciplined. (Tr. 383) There was testimony favorable to the Respondent by way of the stipulated testimony of three character witnesses. The character witnesses consisted of a circuit court judge, a real estate professional, and an attorney. (Tr. 324; Resp. Ex. 4)
The Respondent served in the United States Army Reserves for four years and has been involved in numerous community activities. For example, she was a member of the Geneseo Chamber of Commerce; on the Board of the Good Shepherds Foundation; a member of the Kiwanis; a big sister in the Big Brother, Big Sister program; on the advisory panel for a hospital;
and on the Geneseo Economic Development Committee. She received no compensation for the foregoing activities. (Tr. 262, 301-02)
It appears from the record that the Respondent cooperated with the Administrator during the pre-hearing proceedings in this matter. Additionally, the Respondent admitted many of the factual allegations in the Complaint. She also acknowledged that she engaged in misconduct, by having a conflict of interest during the pertinent real estate transactions, and that a disciplinary sanction is warranted. (Tr. 311-12, 357, 376, 378-79)
We also find that the evidence did not prove that the Respondent acted with the intent to cheat or defraud her clients Elsie Hamilton or Howard Doy. We note that the Respondent was not charged with engaging in conduct involving dishonesty, fraud, deceit, or misrepresentation. The overall circumstances shown by the evidence, including the Respondent's testimony and demeanor, indicate that the Respondent thought that, by arranging the sale of her clients' real estate for the exact price they sought, she acted in full accord with her clients' wishes and interests. (Tr. 268, 279-80, 283, 293-95, 308, 366) It is clear from the evidence, as further discussed below, that the Respondent acted with the intent to aid Gale Griffith financially by assisting Griffith to purchase the farms of the Respondent's clients at a price very favorable to Griffith. Thus, although the Respondent had a clear conflict of interest and effectively put the interest of Griffith, her life partner, above the interest of her clients Elsie Hamilton and Howard Doy, the evidence does not prove that the Respondent intended to harm either Hamilton or Doy.
In aggravation, we consider that the Respondent's misconduct did not arise out of an isolated incident, but rather arose out of two separate real estate transactions. Also, the misconduct involved the representation of clients. See In re Gerard, 132 Ill. 2d 507, 541, 548
N.E.2d 1051, 1065 (1989) ("unethical conduct, especially in attorneys' relationships with clients, must not and will not be taken lightly by the profession or by this court").
It should have been apparent to any attorney, and especially to an attorney with more than 15 years of experience, that it was a conflict to represent the sellers of real estate while having a personal, financial, and professional relationship with the purchaser of the real estate. See In re Twohey, 191 Ill. 2d 75, 89, 727 N.E.2d 1028, 1036 (2000) ("Respondent's failure to recognize such a clear conflict of interest in his representation of both a lender and a borrower reveals a lack of understanding of his ethical obligations as an attorney").
Of particular concern, is that the Respondent was not fully candid and truthful in her testimony. See In re Gorecki, 208 Ill. 2d 350, 366, 802 N.E.2d 1194, 1202-03 (2003) ("a lack of candor before the Hearing Board is a factor that may be considered in aggravation").
First, the Respondent testified that, shortly after Gale Griffith had purchased the Elsie Hamilton farm, real estate broker Steve Carton began making telephone calls to her inquiring whether that farm was for sale. The Respondent said she informed Griffith of the calls, Griffith insisted that the farm was not for sale, and the Respondent conveyed this to Carton. Ultimately, after "several" calls from Carton, Griffith finally said she would sell the farm for $250,000. Carton's client agreed to that price and purchased the farm. (Tr. 287-90) The purpose of the foregoing testimony by the Respondent was to corroborate Griffith's claim that she did not purchase the Elsie Hamilton farm with the intent to resell it for a quick profit, but agreed to sell it only after repeated calls from Mr. Carton and after Mr. Carton's client agreed to pay a purchase price of $250,000, which Griffith was "expecting [to] be rejected." (Tr. 226-29, 242, 244)
Mr. Carton, on the other hand, testified that during his initial telephone call to the Respondent, or during a return call from her, she told him that the former Elsie Hamilton farm
was for sale and that the price was $250,000. (Tr. 49-50, 53, 54) Mr. Carton also testified that the Respondent never told him that the foregoing farm was not for sale. (Tr. 50) We found no reason or motive for Mr. Carton to testify falsely in this matter. He appeared to be certain regarding this matter, and we found him to be a very credible witness. Thus, the Respondent testified falsely that she received numerous telephone calls from Mr. Carton, that she told him the farm was not for sale, and that Griffith decided to sell the former Hamilton farm only after several telephone calls from Carton.
Second, the Respondent testified that Gale Griffith became involved in the purchase of the Howard Doy farm sometime after Gale Griffith agreed to sell the former Elsie Hamilton farm to Alan Ernst. The Respondent explained that Griffith's purchase of the Doy farm was "for trade purposes" under the Internal Revenue Code to (properly) avoid paying capital gains tax on the sale of the former Hamilton farm. (Tr. 291, 296-97) The purpose of the foregoing testimony was to show that Griffith did not purchase the Doy farm with the intent to make a quick profit by reselling it.
The written agreement for Griffith's sale of the former Elsie Hamilton farm to Alan Ernst was dated August 10, 2005 (Adm. Ex. 18), which was more than two months after Griffith executed the agreement to purchase the Doy farm. The agreement to purchase the Doy farm was dated May 23, 2005. (Adm. Ex. 13) Mr. Carton, who was the realtor for Ernst, testified that "all the paperwork" for the sale of the farm from Griffith to Ernst was executed within a few days of his initial telephone call to the Respondent regarding the farm being for sale. (Tr. 50-51, 53-54) As mentioned above, we found Mr. Carton to a credible witness. We also note that, although Gale Griffith insisted that the purchase of the Doy farm was after she had agreed to sell the former Hamilton farm to Ernst, she testified that the telephone calls from Mr. Carton to the
Respondent, on behalf of Ernst, commenced in July 2005 (Tr. 243-44, 246), which was after Griffith had signed the agreement to purchase the Doy farm.
Furthermore, the Respondent testified that the telephone calls from Mr. Carton, on behalf of Ernst, commenced in about March 2005 (Tr. 287, 290; Adm. Ex. 4) and that the agreement for Ernst to purchase the former Hamilton farm from Griffith was not executed until "much later" (Tr. 290-91), that is on August 10, 2005 (Adm. Ex. 18). We find it unbelievable, as testified by the Respondent, that Carton would virtually badger the Respondent with numerous telephone calls trying to get Griffith to sell the farm to Ernst and then, after the Respondent communicated Griffith's oral agreement to sell the farm to Ernst, that Carton or Ernst would then let the matter lapse for more than two months before a written sales agreement was signed.
Third, the evidence showed, and the Respondent acknowledged, that both Howard Doy and his daughter Suzann told the Respondent that Howard wanted David Dobbels to be given the first opportunity to purchase the Howard Doy farm. (Tr. 18, 186, 292, 294) The Respondent testified that she later met with Howard, and that Howard told her he had talked with Dobbels and that Dobbels would pay only $180,000 for the farm, instead of the $200,000 Howard wanted. The Respondent further testified that Howard then directed her to contact other people about buying Howard's farm. (Tr. 295) The foregoing testimony by the Respondent regarding Howard Doy's statements to her was false.
It is clear from David Dobbels' testimony that he did not talk with Howard Doy about purchasing Doy's farm after Howard had directed the Respondent to give Dobbels the first opportunity to purchase the farm. (Tr. 148-51) We found Mr. Dobbels to be a very credible witness. There would be no reason for Howard to tell the Respondent that he had talked to Dobbels about purchasing the farm when he had not done so. Also, we find it impossible to
believe that Howard Doy changed his mind about giving Dobbels the first opportunity to purchase the farm without either Suzann Doy or Dale Doy being aware of such a change of heart. (Tr. 85-86; 184, 199-200) Suzann Doy also testified that, when Dobbels appeared to be angry after learning that the Doy farm had been sold to someone else, Suzann asked the Respondent if she had talked with Dobbels about purchasing the farm, and the Respondent replied "no" without further explanation. (Tr. 189) If Howard had in fact changed his mind and told the Respondent not to contact Dobbels, we believe it improbable and contrary to human experience for the Respondent not have mentioned this to Suzann when Suzann asked about whether the Respondent had contacted Dobbels.
We also note that the Respondent prepared a letter, dated July 21, 2005, addressed to David Dobbels in which she stated, among other things, that it was Howard Doy's "understanding that you were not willing to meet his $200,000.00 purchase price and he made it clear to you that he would sell the farm for that price to you which you rejected on numerous occasions." (Resp. Ex. 1) Mr. Dobbels, who we found to be credible, testified that he did not receive the foregoing letter and did not learn of its existence until about January 2007. (Tr. 154-55, 167-69) We also note that the letter, which was sent to Suzann Doy (Tr. 190, 210-11), was inconsistent with Howard's directive for the Respondent to give Dobbels first opportunity to purchase the farm, unless Howard had a subsequent conversation with Dobbels about the matter. Clearly, no such conversation took place.
The Respondent also demonstrated a lack of honesty in handling the closing for the sale of the Elsie Hamilton farm to Gale Griffith. The Respondent prepared the closing statement that listed a seller's expense of $9,997.75 for an "Agents Commission [of] 7%." (Adm. Ex. 4) She also prepared an agreement for the sale of the farm that listed a "buyer's agent commission of
7%." (Adm. Ex. 3) The $9,997.75, which was 7% of the sale price of the Hamilton farm, was paid to Janet Nelson by way of a check from the personal bank account of Gale Griffith. (Adm. Ex. 12): Tr. 114-15) Janet Nelson was not a real estate agent, but was acting on behalf of Elsie Hamilton pursuant to a power of attorney. (Tr. 103-04; Adm. Ex. 3, p. 2; Adm. Ex. 5, p. 2) The Respondent explained that Nelson sought some money for helping Hamilton, she advised Nelson that a fiduciary could receive a reasonable amount for services rendered, and she told Nelson "to determine what a reasonable amount is." The Respondent further testified that Nelson did not want to be paid from the Respondent's trust account, because the Respondent would report the payment to the Internal Revenue Service on a Form 1099, and Nelson asked if she could be paid with a check from Griffith's bank account. (Tr. 285-86)
It is clear that Nelson was not entitled to a 7% commission arising out of the sale of the Elsie Hamilton farm. It is also clear, even under the Respondent's version of the matter, that Nelson was not paid the $9,997.75 as a "agent's commission." In addition, the Respondent knowingly aided Nelson in obtaining the $9,997.75 without the payment being reported to the Internal Revenue Service on a Form 1099. By such actions, the Respondent demonstrated a lack of honesty and integrity.
It is clear from the evidence that the prices at which Gale Griffith purchased the Elsie Hamilton farm, $142,825, and the Howard Doy farm, $200,000, were substantially less than the fair market value of either farm. Griffith obtained a 100% loan from Central Bank to purchase the Hamilton farm. (Tr. 66, 225) In a memorandum regarding Griffith's loan application, Randy Clary, president of Central Bank in Fulton, stated that Griffith "has requested 100% financing based on the purchase price of $2,500 per acre" and that "[c]urrent land sales support the price as recent auction farm real estate has fetched $3,500 - $4,000 per acre." (Adm. Ex. 8; Tr. 67-69, 72)
Griffith purchased the Hamilton farm on March 1, 2005 (Adm. Ex. 40), and then re-sold it to Mr. Ernst on August 30, 2005, for $250,000 (Adm. Ex. 18, 20). When asked why Mr. Ernst was willing to pay $250,000, which was $4,375 an acre, for the farm, real estate broker Steve Carton said because Ernst "thought it was a fair price." (Tr. 61) Thus, within six months Griffith sold the former Hamilton farm for $107,175 more than she had paid for it.
In regard to the Howard Doy farm, David Dobbels offered Doy $225,000 for the farm shortly after Dobbels learned Doy had signed an agreement to sell the farm to Griffith for $200,000. (Tr. 152, 299-300) Mark Mosbarger, a loan officer at Central Bank, prepared an "in-house memorandum," dated August 31, 2005 (Adm. Ex. 21), regarding Griffith's loan application to purchase the Doy farm. Mr. Mosbarger stated in the memorandum that the "value of the property is conservatively estimated at $3,000 per acre, for a total of $336,000." (Tr. 76-78, 81; Adm. Ex. 21) Griffith commissioned an appraisal of the farm shortly after she purchased it. The appraiser concluded that the fair market value of the former Doy farm was $436,800 as of September 28, 2005, which was less then a month after Griffith purchased the property. (Adm. Ex. 27; Tr. 256-57) Griffith seemingly attempted to discredit the value stated in the appraisal, by testifying that she had conversations with the appraiser in advance, and "wanted to make sure that I could get all the money that I needed for it," and "wanted him to appraise it high." (Tr. 257-58) Griffith's testimony in this regard is troubling. If she did request the appraiser to place an incorrect value on her property, it would demonstrate a lack of honesty. On the other hand, if she did not make such a request to the appraiser, then her testimony before us was false. In either event, Griffth has demonstrated a lack of honesty and integrity. We will not question the good faith of the appraiser or the correctness of his opinion based upon the testimony of Griffith. Furthermore, an appraisal commissioned by a sergeant of the Geneseo Police Department
concluded that the market value of the former Howard Doy farm was $300,000 as of July 22, 2005. (Adm. Ex. 26) Although Griffith has not sold the former Doy farm, it is apparent that the farm had a fair market value of, at the very least, $100,000 greater than the price Griffith paid for it at the time of the hearing in this matter.
It is obvious that the Respondent knew, at the minimum, that Gale Griffith was purchasing the Hamilton and Doy farms at very favorable prices. The Respondent is experienced in real estate sales (Tr. 267), is familiar with the "nature of agricultural real estate" (Tr. 268), and she prepares 75 to 85 tax returns for farmers each year (Tr. 314). In discussing the situation of an attorney drafting a will and naming himself as a beneficiary (at the time when there was no specific rule prohibiting it), the Supreme Court stated that "what the respondent did looks bad." In re Barrick, 87 Ill. 2d 233, 238, 429 N.E.2d 842, 845 (1981) Similarly, in this case, where the Respondent, an experienced attorney, represented sellers of real estate, and the life partner of Respondent purchased the real estate for a price significantly lower than the fair market value, it "looks bad."
The Respondent's explanation for her actions was that she carried out the wishes of her clients, that is to sell the Hamilton farm for $142,825, and to sell the Doy farm for 200,000. (Tr. 279-80, 293-94, 372-73) She also said she normally does not get involved with the selling price unless there is something "glaringly wrong." (Tr. 267-68) In the case of In re Beaupre, 03 SH 32, the attorney prepared wills for two clients, in which the attorney and his wife received bequests, in violation of Rule 1.8(c). The attorney explained that he thought he had a duty to carry out his clients' wishes. The Hearing Board stated the following:
The role of an attorney in the attorney-client relationship is not to mechanically carry out the wishes of the client. Rather the attorney must exercise professional judgment, fully advise the client of the ramifications of the client's wishes, assist
the client in making informed and reasoned decisions, and provide legal services consistent with the rules of ethics and the administration of justice.
In re Beaupre, 03 SH 32 Hearing Board Report at 21
In this case, an attorney with undivided loyalty to Elsie Hamilton would surely have inquired into the basis for the value of Hamilton's farm stated in the "Inter-Office Memorandum of the Illinois Department of Human Services (Adm. Ex. 2) and, if not completely satisfied, would have taken other action to determine the fair market value or best selling price for the Hamilton farm. In regard to the Doy farm, as discussed above, the Respondent did not carry out the wishes of Howard Doy, in that she failed to contact David Dobbels and give him the first opportunity to purchase Doy's farm, as Doy directed her to do. An attorney with undivided loyalty to Doy would surely have, at least, inquired about the value Doy placed on his farm and would have given David Dobbels first opportunity to purchase the farm.
In conflicts of interest cases involving attorneys investing client funds, the Supreme Court has commented that the attorneys "failed to investigate the company to insure that the client's investment was sound" In re Rosen, 118 Ill. 2d 365, 382, 515 N.E.2d 85, 93 (1987); In re Twohey,191 Ill. 2d 75, 87-88, 727 N.E.2d 1028, 1035 (2000). Similarly, in this case, the Respondent did nothing to assure that her clients were making sound financial decisions by selling their farms to the Respondent's life partner.
In determining the appropriate discipline in this matter, we have also considered sanctions imposed in other cases, including those cited by the Administrator. The following cases are particularly noteworthy.
In In re Twohey, 191 Ill. 2d 75, 727 N.E.2d 1028 (2000), the attorney had a conflict of interest and breached his fiduciary duty by having an attorney-client relationship with both a lender and borrower and by entering into a business relationship with a client. In aggravation, the
Court stated that the attorney's failure to recognize his "clear conflict of interest in his representation of both a lender and a borrower reveals a lack of understanding of his ethical obligations as an attorney." In mitigation, the Court pointed out that the misconduct did not involve fraud or misrepresentations, the attorney was "cooperative throughout the entire disciplinary process," he had practiced over 30 years without any other disciplinary complaint, and he had a good reputation for honesty and integrity. The attorney was suspended for six months Twohey, 191 Ill. 2d at 84, 89-90, 93, 727 N.E.2d at 1033, 1036, 1038.
In In re Carey and Danis, 99 SH 67 & 68, M.R. 18575 (May 22, 2003), two attorneys had a conflict of interest, in violation of Rule 1.9(a), when they represented clients against a former client in a matter that was substantially related to matters in which they had represented the former client. Also, in a related federal lawsuit, the attorneys gave false answers in an interrogatory and in response to two production requests. (Review Board Report at 2, 9, 15) The mitigation included the "relatively young" ages of the attorneys; evidence of their good reputation for honesty; their cooperation during the disciplinary proceedings; evidence of their community and pro bono work; and the fact that neither of them had any prior discipline. Also, there was "no evidence in aggravation." (Review Board Report at 16). They were suspended for six months. In re Carey and Danis, 99 SH 67 & 68, Review Board Report at 3, 19 (petition to file exceptions to Review Board Report denied in M.R. 18575, May 22, 2003).
In In re Marquis, 99 CH 83, M.R. 17432 (May 25, 2001), the attorney arranged a loan from an 87 year-old client to the attorney's adult daughter, for the daughter to purchase a home. He also represented all parties at the real estate closing. The daughter did not qualify for a commercial loan. The attorney did not disclose to his clients that his professional judgment on their behalf could be affected by the representation. The attorney had no prior discipline in more
than 20 years of practice, he cooperated with the Administrator, and he acknowledged the misconduct and expressed remorse. A suspension of nine months was imposed. Marquis, 99 CH 83, Petition to Impose Discipline on Consent, p. 1-4 (Petition allowed in M.R. 17432, May 25, 2001)
In In re Beaupre, 03 SH 32, M.R. 20233 (September 26, 2005), the attorney prepared wills for two clients in which he was a beneficiary, and he represented parties with conflicting interest when one of the wills he prepared was contested. His conduct constituted over-reaching. Also, he did not disclose his conflict of interest to his clients. It was noted in both the Hearing Board Report (at 35) and the Review Board Report (at 9) that there was no charge or evidence of dishonesty, fraud, or bad faith. The attorney had practiced law for about 37 years without previous discipline; he "cooperated fully in the disciplinary process;" he presented an "impressive array of character witnesses;" and he "has been involved in numerous volunteer and community activities." (Hearing Board Report at 35; Review Board Report at 10) Both the Hearing Board Report (at 35) and the Review Board Report (at 10) pointed out that there "was no evidence in aggravation." The attorney was suspended for 90 days. Beaupre, M.R. 20233, September 26, 2005)
In In re O'Donnell, 04 CH 115, M.R. 22181 (March 17, 2008), the attorney breached his fiduciary duty and had a conflict of interest by representing both parties to a real estate transaction; he did not disclose his relationships to the parties; and he altered a document without disclosing the alterations to the preparer. The attorney "intended to help all parties involved to the best of his ability" and he "did not intend to make a misrepresentation" in altering the document. The attorney had not been previously disciplined; he presented several character witnesses; he admitted his wrongdoing and expressed remorse; he had performed pro bono
services and participated in community activities; and he "did not financially benefit from his wrong-doing." A suspension for sixty days was imposed. O'Donnell, 04 CH 115, Hearing Board Report at 9-15 (Hearing Board Report affirmed by the Review Board) (Petition to file exceptions to the Review Board Report denied in M.R. 22181, March 17, 2008).
Finally, attorneys have received the sanction of censure or reprimand in cases in which their conflict of interest occurred in an isolated matter, they had no prior misconduct, and there has been very little, if any, aggravation. See In re Gearhart, 00 SH 82, M.R 20221 (September 26, 2005) (censure); In re Greenberg, 05 CH 26, M.R. 20776 (March 21, 2006)(censure); In re Murzyn, 05 CH 73, M.R. 21436 (March 19, 2007)(censure); In re Magro, 02 CH 58 (April 3, 2003)(reprimand by Hearing Board).
After considering the nature of the Respondent's misconduct, the aggravating and mitigating factors, the cases discussed above, and the purpose of a disciplinary sanction, we conclude that a suspension is the appropriate sanction in this matter.
Therefore, we recommend that the Respondent, Theresa Lea Jones, be suspended from the practice of law for a period of six (6) months.
Date Entered: November 25, 2008
|John L. Gilbert Chair, with Panel Members Arden Lang and Carolyn Berning, concurring.|