Rosin, In re

• Decision Date: 22 July 1993
• Docket Number: No. 74615,74615
• Parties: , 189 Ill.Dec. 400, 23 UCC Rep.Serv.2d 117 In re Joseph ROSIN, Attorney, Respondent.
• Court: Illinois Supreme Court

Page 368

620 N.E.2d 368

156 Ill.2d 202, 189 Ill.Dec. 400, 23

UCC Rep.Serv.2d 117

In re Joseph ROSIN, Attorney, Respondent.

No. 74615.

Supreme Court of Illinois.

July 22, 1993.

Rehearing Denied Oct. 4, 1993.

Jerome Larkin and Jonathan P. Siner, Chicago, for the Administrator of the Atty. Registration and Disciplinary Com'n.

Russell J. Hoover, Jenner & Block, Chicago, for respondent, and Joseph A. Rosin, respondent pro se.

Justice BILANDIC delivered the opinion of the court:

This disciplinary action against respondent, Joseph Rosin, began with a two-count complaint charging that he had commingled and converted client funds, and that he also commingled and converted the interest earned on those funds. The Hearing Board found that respondent had commingled but not converted client funds; however, it did not make any findings and conclusions regarding the interest earned on those funds. The Hearing Board recommended censure. The Review Board found that respondent had commingled client funds, and that he also had converted and commingled the interest earned on those funds. The Review Board recommended censure, conditioned on respondent's paying restitution of $7,374.83 to a former client for interest earned on her funds.

Neither party filed exceptions to the Review Board report. The Administrator then filed a motion with this court to approve and confirm the report and its recommendation. In that motion, the Administrator argued that each finding and legal conclusion of the Review Board was supported by the facts and relevant case law. Moreover, the Administrator stated that the recommendation of censure was consistent with prior precedent of this court.

This court denied the Administrator's motion to approve and confirm the findings of the Review Board, and ordered that briefs be filed and oral arguments held pursuant to Rule 753(e)(1) (134 Ill.2d R. 753(e)(1)).

The stipulated facts reveal that respondent was admitted to the Illinois bar in 1950, and engaged in a general practice of law with a concentration in the area of plaintiff personal injury and worker's compensation claims. ¹

Between December 1, 1981, and October 6, 1986, respondent maintained a business firm account at Bank Leumi in Chicago. Upon completion of law cases (by settlement or judgment), the satisfaction or payment was made with an insurance draft payable jointly to the client and respondent. These drafts were usually drawn on out-of-State banks. First, attorney fees and costs were deducted. Next, the client would endorse the insurance draft and simultaneously receive a settlement check for the net proceeds due to the client drawn on respondent's business firm account at Bank Leumi. Usually, the client would present respondent's check to Bank Leumi as soon as it was received.

After the insurance draft was endorsed by the client, respondent would also endorse it and deposit it into the firm business account at Bank Leumi during the regular course of business. Often, clients cashed their checks before respondent deposited the insurance draft.

In the normal course of banking practice, the insurance company draft would require approximately five business days to clear before it was credited to respondent's business firm account. Nevertheless, every client settlement check was honored when presented for payment. All business transactions of the firm were conducted through the firm account. Respondent did not maintain a separate client trust account until 1986, when this court issued its opinion in the case of In re Elias (1986), 114 Ill.2d 321, 102 Ill.Dec. 314, 499 N.E.2d 1327.

On several occasions, the balance in the firm account was less than the amount of an outstanding check issued to a client. The manager of Bank Leumi testified that respondent was a well-regarded customer with a $600,000 line of credit, and that he had arranged to guarantee payment of all checks written against his account regardless of the firm balance. It is undisputed that every settlement check issued by respondent to a client was promptly honored upon presentment, and that no checks were ever dishonored.

On February 1, 1983, the bank began to pay interest on funds deposited into the account. The complaint charged that respondent never informed clients that their funds had earned interest, and that the interest was retained in the firm account. In particular, on January 3, 1983, respondent issued a settlement check in the amount of $162,000 to a client, Penelope Bell, as her portion of the proceeds in a wrongful death action. Bell did not deposit respondent's check into the bank until July 25, 1983. During the seven months that Bell held the settlement check, the bank paid respondent $4,076.73 in interest on those funds.

The Review Board noted that respondent made no effort to notify Bell that interest was earned on the settlement check. According to the Review Board, respondent's failure to reimburse Bell for the interest which accrued during the seven-month period, compounded over the past nine years, resulted in a total obligation to Bell in the amount of $7,374.83. Respondent complied with the condition recommended by the Review Board, and issued a check to Bell for $7,374.83 for the earned interest. In addition, respondent has paid $5,770.74 to the Lawyers Trust Fund for the interest attributable to the settlement checks.

Mindful of the fact that the alleged misconduct at issue occurred prior to the Elias ruling, we now address whether: (1) the overdraft protection agreement between respondent and Bank Leumi precluded respondent from converting client funds; (2) client funds were commingled in the firm account; and (3) respondent commingled and converted the interest earned on client funds.

I

Conversion has been defined by this court as " 'any unauthorized act, which deprives a man of his property permanently or for an indefinite time.' " (In re Thebus (1985), 108 Ill.2d 255, 259, 91 Ill.Dec. 623, 483 N.E.2d 1258, quoting Union Stock Yard & Transit Co. v. Mallory, Son & Zimmerman Co. (1895), 157 Ill. 554, 563, 41 N.E. 888.) The essence of an action for conversion is the wrongful deprivation of property from the person entitled to its possession. Glaser v. Kazak (1988), 173 Ill.App.3d 108, 115, 122 Ill.Dec. 881, 527 N.E.2d 379; People ex rel. Carey v. Lincoln Towing Service, Inc. (1977), 54 Ill.App.3d 61, 11 Ill.Dec. 640, 369 N.E.2d 94; Hobson's Truck Sales, Inc. v. Carroll Trucking, Inc. (1971), 2 Ill.App.3d 978, 276 N.E.2d 89.

The Review Board found that because respondent maintained a $600,000 line of credit with the bank, client funds in his law firm account were protected and no conversion occurred. We agree.

The statutory law governing commercial paper, as applied to the facts in issue, leads to the unmistakable conclusion that respondent did not convert client funds. (Ill.Rev.Stat.1989, ch. 26, par. 3-101 et seq.) The settlement check issued by respondent is a negotiable instrument, for it contained an order to pay a fixed amount of money on demand to the client at the time it was issued. (Ill.Rev.Stat.1989, ch. 26, par. 3-104(1)(a).) As set forth in section 3-202(1) of the Commercial Code, a negotiable instrument payable to order is negotiated by delivery and indorsement. (Ill.Rev.Stat.1989, ch. 26, par. 3-202(1).) As the maker of the settlement check, respondent's liability was established at the time that he signed it. (Ill.Rev.Stat.1989, ch. 26, par. 3-401(1).) When respondent signed and delivered the check to the client, he transferred to the client all rights that he had to the funds which were the subject matter of the check. (Ill.Rev.Stat.1989, ch. 26, par. 3-201(1).) In the event the check was dishonored upon presentment, the client's cause of action against respondent as maker accrued upon the date of issue. (Ill.Rev.Stat.1989, ch. 26, par. 3-122(1)(b).) Application of the foregoing sections of the Uniform Commercial Code clearly establishes that when respondent issued the settlement check, he was legally bound to transfer possession of specified funds in the firm account to the client, who, in turn, had an enforceable right to those funds.

Assuming, arguendo, that the balance in the firm account was less than the stated amount of the check when the client presented it for payment, section 4-401 of the Commercial Code explicitly provides that a bank may charge against a customer's account any item which is otherwise properly payable from that account even though the charge creates an overdraft. (Ill.Rev.Stat.1989, ch. 26, par. 4-401(1).) Moreover, section 4-401 was subsequently amended to provide that an item is properly payable if it is authorized by the customer, and is in accordance with any agreement between the customer and the bank. Ill.Rev.Stat.1991, ch. 26, par. 4-401(a).

The testimony of the bank manager indicated that respondent was a well-regarded customer with a $600,000 line of credit, and had arranged to guarantee payment of all checks written against his account. It is undisputed that no settlement check was ever dishonored by the bank, nor had any client voiced a complaint, experienced delay, or incurred a financial loss as a result of respondent's banking arrangement. As stated, a wrongful deprivation of property from the person entitled to possession permanently or for an indefinite time is an essential element of a cause of action for conversion. (In re Thebus (1985), 108 Ill.2d 255, 91 Ill.Dec. 623, 483 N.E.2d 1258.) Such wrongful deprivation of property from the client never occurred in this case. Indeed, in the event that the insurance draft had been dishonored when it was presented by respondent, he alone would have shouldered the risk because the client had already received a check guaranteed to be collectible.

II

We next consider whether respondent commingled client funds in violation of Disciplinary Rule 9-102(a) (107 Ill.2d R. 9-102(a)). That section provides in relevant part:

"All funds...