Owens, In re

• Citation: 126 Ill.Dec. 563,125 Ill.2d 390,532 N.E.2d 248
• Decision Date: 06 December 1988
• Docket Number: No. 67040,67040
• Parties: , 126 Ill.Dec. 563 In re Carroll L. OWENS et al., Attorneys, Respondents.
• Court: Supreme Court of Illinois

Page 248

532 N.E.2d 248

125 Ill.2d 390, 126 Ill.Dec. 563

In re Carroll L. OWENS et al., Attorneys, Respondents.

No. 67040.

Supreme Court of Illinois.

Dec. 6, 1988.

Daniel Drake, of Springfield, for the Administrator of the Attorney Registration and Disciplinary Commission.

Robert B. Oxtoby, of Van Meter, Oxtoby & Funk, of Springfield, for respondents.

Justice CUNNINGHAM delivered the opinion of the court:

This matter is before the court upon exceptions of respondents, Carroll L. Owens and Gerald Dee Owens, to the report of the Hearing Board, which was adopted by the Review Board, and which recommended a two-year suspension. Two members of the Review Board recommended that the matter be remanded for additional evidence.

On February 27, 1986, the Administrator of the Attorney Registration and Disciplinary Commission filed with the Hearing Board a two-count complaint based on a judgment against respondents in a civil fraud action entered on December 14, 1981.

Counts I and II of the complaint charge respondents with engaging in conduct involving dishonesty, fraud, deceit and misrepresentation in violation of Rule 1-102(a)(4) of the Code of Professional Responsibility (Code) (107 Ill.2d R. 1-102(a)(4)); conduct that is prejudicial to the administration of justice in violation of Rule 1-102(a)(5) of the Code (107 Ill.2d R. 1-102(a)(5)); entering into a business transaction with clients (Bert Beatty and John Beatty (hereafter Beatty brothers)) in which they and their clients have conflicting interests, without the clients' consent after full disclosure in violation of Rule 5-104(a) of the Code (107 Ill.2d R. 5-104(a)); intentionally prejudicing or damaging their clients (Beatty brothers) during the course of the professional relationship in violation of Rule 7-101(a)(3) of the Code (107 Ill.2d R. 7-101(a)(3)); knowingly making a false statement of fact in violation of Rule 7-102(a)(5) of the Code (107 Ill.2d R. 7-102(a)(5)); and engaging in conduct that tends to bring the courts and the legal profession into disrepute and gives the appearance of impropriety.

Before the instant disciplinary action was filed, the Beatty brothers filed and obtained a judgment in a seven-count complaint in the circuit court of Franklin County. In that complaint, the Beatty brothers alleged that respondents had fraudulently breached a partnership agreement entered into on July 15, 1970, and had fraudulently breached their corresponding fiduciary duty to the Beatty brothers. The Beatty brothers alleged in part essentially the same conduct that gave rise to this disciplinary action. Applying a "clear and convincing evidence" standard of proof, the trial court found that the allegations of fraudulent breach of a fiduciary duty and fraudulent breach of a partnership agreement had been established. On September 1, 1981, the court awarded the Beatty brothers $2,000 in compensatory damages and assessed against each defendant $60,000 in punitive damages. The judgment became a final order and was subsequently satisfied by conveyance of an interest in a radio station.

The Administrator sought to rely on the factual findings in the above civil case. On June 6, 1987, the Administrator filed a motion for summary determination of major issues, pursuant to section 2-1005(d) of the Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-1005(d)). The motion requested that the Hearing Board enter an order stating that there are no genuine issues of fact due to the factual findings in the civil case. The Administrator filed with the motion certified copies of the jury verdict (which the trial court considered advisory due to the equity nature of the case) the special interrogatories submitted to the jury, the jury's answers, the findings of fact and conclusions by the court, and the judgment. The motion was premised on the assumption (developed in a memorandum of law accompanying the motion) that the doctrine of "estoppel by verdict" precluded respondents from relitigating the factual findings in the civil case. In moving for summary judgment, the Administrator emphasized that the burden of proof in a civil fraud action is the same as in a disciplinary action: clear and convincing evidence. The motion was granted, and respondents were allowed to present evidence (including limited evidence regarding the underlying facts) only in extenuation and mitigation.

Because the underlying facts upon which disciplinable actions were found to have occurred were not litigated in this action, we herein summarize the factual findings in the civil proceeding involving the same conduct, factual findings as to which collateral estoppel was applied.

On July 15, 1970, Bert and John Beatty (Beatty brothers) and respondents (Owens brothers) entered into a written partnership agreement, for the stated purpose of operating a radio station in Benton. The Beatty brothers were to provide technical and financial support to the partnership, and respondents agreed to provide legal services to the partnership. As part of this agreement, respondents applied for and eventually received a Federal Communications Commission (FCC) broadcasting license for an FM station.

In August 1970, respondents filed the first application for an FCC license, and attached thereto was a copy of the original partnership agreement of July 15, 1970.

In July 1971, the FCC denied this application. In November 1971, respondents filed another application with the FCC on behalf of the partnership. From November 1971 to October 19, 1972, respondents communicated with the FCC concerning amendments to the second application (November 1971). During this period of time the Beatty brothers never told respondents that they intended to withdraw from the partnership, nor did the Beatty brothers take any action to withdraw from the partnership.

On October 19, 1972, respondent Carroll L. Owens sent a letter to the FCC stating that the Beatty brothers were withdrawing from the partnership. Respondent Gerald Dee Owens was aware of this letter.

On January 1, 1973, respondents entered into a new partnership agreement that did not include the Beatty brothers. The new partnership agreement was substantially the same as the original agreement, and even adopted the original partnership name. Respondents did not disclose the existence of this new partnership to the Beatty brothers.

On March 19, 1973, respondents filed amendments to the second application (November 1971) and attached a copy of the new partnership agreement. In April 1973, the FCC approved the March 19, 1973, amended application and issued a license to the new partnership to operate an FM station in Benton. Shortly thereafter, respondents, doing business as Rend Lake Broadcasting Company, began broadcasting under the call letters WQRX.

Based upon these facts as found in the civil proceeding, the Hearing Board concluded that respondents had engaged in all of the misconduct alleged in the complaint, except for the allegation that their conduct was prejudicial to the administration of justice. Before recommending the two-year suspensions, however, the Hearing Board heard some evidence in mitigation. Several witnesses testified as to the character of respondents, and each respondent testified regarding his length of practice and that he had never previously been accused of professional misconduct. The Administrator offered no evidence in aggravation.

The threshold question to be considered is whether respondents can be precluded from relitigating facts resolved adversely to them in a prior civil proceeding with another party under the general law of collateral estoppel. Specifically, we must determine whether the Administrator who was not a party to a prior judgment, may nevertheless use that judgment "offensively" to prevent respondents from relitigating the issue involved in the Beatty brothers' case. Offensive use of collateral estoppel occurs when a plaintiff seeks to foreclose a defendant from litigating an issue the defendant has previously litigated unsuccessfully in another action. Defensive use occurs when a defendant seeks to prevent a plaintiff from asserting a claim the plaintiff has previously litigated and lost.

On several occasions many years ago, this court stated essentially that offensive use of collateral estoppel was to be treated in the same manner as defensive use of collateral estoppel. In Charles E. Harding Co. v. Harding (1933), 352 Ill. 417, 186 N.E. 152, this court stated, in reference to collateral estoppel:

"This principle is sometimes called estoppel by verdict, and the estoppel is equally available to either party, the plaintiff in support of his action or the defendant of his defense, when the circumstances warrant it." 352 Ill. at 427, 186 N.E. 152.

See also Louisville, New Albany & Chicago Ry. Co. v. Carson (1897), 169 Ill. 247, 48 N.E. 402.

More recently, however, a substantial change has occurred in the application of collateral estoppel: elimination of the mutuality requirement. Under the mutuality doctrine, neither party could use a prior factual finding as an estoppel against the other unless both parties were bound by the judgment. (See In re Hutul (1973), 54 Ill.2d 209, 296 N.E.2d 332.) The mutuality requirement was removed in Illinois State Chamber...