In re Karavidas

2013 IL 115767

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

(Docket No. 115767)

In re THEODORE GEORGE KARAVIDAS, Attorney-Respondent.

Opinion filed November 15, 2013.

CHIEF JUSTICE GARMAN delivered the judgment of the court,

with opinion.

Justices Freeman, Kilbride, Burke, and Theis concurred in the

judgment and opinion.

Justice Thomas dissented, with opinion, joined by Justice

Karmeier.

OPINION

¶1 The Administrator of the Attorney Registration and Disciplinary

Commission (ARDC) filed a one-count complaint against respondent,

Theodore George Karavidas, charging him with various violations of

the Illinois Rules of Professional Conduct. The Hearing Board found

that he breached his fiduciary duty to the beneficiaries of his father’s

estate by converting funds from the estate and recommended that he

be suspended for four months. The Review Board reversed and

recommended that the charges be dismissed. The Administrator filed

a petition for leave to file exceptions pursuant to Supreme Court Rule

753(e) (Ill. S. Ct. R. 753(e) (eff. Sept. 1, 2006)), which this court

allowed.

¶2 BACKGROUND

¶3 Respondent was admitted to practice law in Illinois in 1979 and

thereafter worked for the City of Chicago, the Attorney General, and

several law firms. In 1988, he opened his own practice, focusing on

personal injury law. He has no record of previous disciplinary actions

and no professional experience in matters of probate or trusts.

¶4 Attorney John Hayes, who specialized in estate and probate

matters, prepared a will and trust documents for respondent’s father,

George Karavidas. The elder Karavidas executed the documents on

February 17, 2000, and died later that day. Respondent was named in

the will to be executor of his father’s estate and in the trust documents

to be successor trustee. Respondent retained Hayes and his law firm,

Pedersen & Houpt, to represent him as executor. Hayes filed a

petition to probate the estate on April 11, 2000.

¶5 The will provided for George’s personal property to be given to

his wife, Lillian, and directed that the remainder of the estate pour

over into the unfunded trust. The will also authorized independent

administration of the estate, meaning that the executor was allowed

to take actions with regard to the estate without court approval. See

755 ILCS 5/28-1 (West 2000). The probate estate was valued at

approximately $700,000 and included investment accounts with

PaineWebber and Harris Investors. In addition, the estate included an

interest in a family business called Marie’s Pizza and Liquors

(Marie’s).

¶6 The trust documents provided that upon George’s death and the

resulting transfer of estate assets to the trust, the successor trustee was

to create two separate trusts. A family trust was to be funded first, in

an amount equal to the maximum federal estate tax exemption (then

$675,000); the remaining assets were to be placed in a marital trust

for Lillian’s benefit. Upon exhaustion of the funds in the marital trust,

the principal of the family trust was to be used for Lillian’s health and

support. In addition, the trustee was given the authority to distribute

family trust assets to George’s descendants, a group consisting of

respondent and his sister, Nadine, provided that the distributions were

for the beneficiary’s health, support, or education. When making

distributions from the family trust, the trustee was instructed to “give

primary consideration” to Lillian’s needs. Upon Lillian’s death, any

remaining assets of the family trust were to be distributed in equal

shares to respondent and Nadine, without regard to any distributions

made to them earlier. However, the trust document also gave Lillian

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a testamentary power of appointment, under which she could appoint

“any one or more” of George’s descendants and their spouses to take

the principal of the family trust upon her death. Thus, it was not

certain that either respondent or his sister would ever receive any

funds from this trust.

¶7 Respondent did not transfer any estate assets to the existing trust

or create the family and marital trusts. On August 9, 2000, he

withdrew $50,000 from one of the investment accounts for his own

use. In addition, between August 2, 2000, and July 1, 2005,

respondent made multiple withdrawals totaling $398,104 from

another investment account for his own use. Between February 1,

2001, and October 17, 2005, he deposited $349,604 of his own funds

into the same account. He also made payments of his own funds

directly to Marie’s, his mother, and his sister. The largest deficit of

estate funds due to these transactions at any time was $152,104,

which was less than one-third of the amount of the entire estate. The

Administrator does not allege that any further restitution is owed to

the estate.

¶8 Respondent also used estate funds to purchase a new Mercedes

automobile for Lillian, to pay her health insurance premiums and her

real estate taxes, to make contributions to Nadine’s Individual

Retirement Account (IRA) and to his wife’s IRA, to pay a portion of

the real estate taxes on the building that housed Marie’s, and to pay

Nadine’s personal income taxes. At the request of Nadine, who

operated Marie’s, he made advances from the estate of $339,247 to

keep Marie’s in business. He also paid approximately $20,000

directly to Nadine.

¶9 In 2006, Nadine learned that respondent had attempted to sell

Marie’s without her or her mother’s knowledge. She retained an

attorney to represent herself and Lillian, and he filed an appearance

in the probate case seeking to terminate independent administration.

The petition alleged, among other things, that respondent had not

circulated an inventory of the assets of the estate or an account of his

administration. Later, Lillian and Nadine sought to have respondent

removed as executor. Thereafter, the probate court terminated

respondent’s independent administration of his father’s estate, and he

resigned as executor. Nadine became executor of the estate.

¶ 10 On December 30, 2009, the Administrator filed a one-count

complaint against respondent, alleging that he engaged in: (1)

conversion of assets entrusted to him as executor of his father’s

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estate; (2) breach of fiduciary obligations owed to the beneficiaries of

the estate; (3) conduct involving dishonesty, fraud, deceit, or

misrepresentation, in violation of Rule 8.4(a)(4) (Ill. R. Prof. Conduct

R. 8.4(a)(4) (eff. July 6, 2001)); (4) conduct that is prejudicial to the

administration of justice, in violation of Rule 8.4.(a)(5) (Ill. R. Prof.

Conduct R. 8.4(a)(5) (eff. July 6, 2001)); and (5) 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 (Ill. S. Ct. R. 770 (eff. Apr. 1, 2004)).

¶ 11 At the hearing, the Administrator called five witnesses, including

Lillian and Nadine. Respondent called four witnesses and testified on

his own behalf.

¶ 12 Hayes testified that he prepared the will and trust documents and

that no assets were placed in the trust prior to George’s death. He

summarized the terms of the will and trust and explained that the

family trust would have to be funded before the estate could be

closed. If no funds remained after fully funding the family trust, the

marital trust would not be funded. As attorney for the estate, he

received copies of the monthly statements of the investment accounts.

The executor of the estate had the authority to act on behalf of the

estate with regard to these accounts. Hayes was not aware of the loans

to respondent when they occurred, but became aware of them when

he prepared an accounting of the estate in response to Nadine’s

motion in the probate case. By that time, all of the loans had been

repaid by respondent. The repayments did not include interest on the

amounts borrowed.

¶ 13 Hayes was aware of payments made by respondent on behalf of

his mother and sister, but was not aware of any notice to them

regarding any loans or payments of estate funds. He also knew of

payments made to fund repairs and operating expenses for Marie’s,

which was losing money, had overdrafts on its checking accounts,

and had ceased paying rent. Respondent’s transfers for Marie’s

totaled $339,236.50. Hayes was also aware that respondent had asked

one of Hayes’s law partners to draft a sales agreement because he

intended to sell the business to its manager. Hayes ceased

representing the estate when respondent withdrew as executor and

was replaced by his sister.

¶ 14 Attorney Theodore Rodes, Jr., who specializes in estate planning

and trusts, was called as an opinion witness. After reviewing the will

and trust documents, he concluded that neither the documents nor the

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Illinois Probate Act authorized the respondent to make loans from the

estate to himself. As independent executor, respondent was allowed

to take appropriate actions with regard to the estate without court

approval. However, as a fiduciary, he had a duty of loyalty, a duty to

avoid self-dealing, and a duty to protect the interests of the

beneficiaries. The duty to avoid self-dealing prohibits one from

placing oneself on both sides of a transaction, such as lender and

borrower. Rodes believed that these duties should have been clear to

the respondent. Absent specific authority in the documents, the loans

would have been proper only if authorized by court order or if the

beneficiaries had agreed.

¶ 15 Rodes further opined that respondent violated his duties as

executor when he made payments on behalf of his mother and sister.

Under the will, he was directed to distribute his father’s personal

property to Lillian, which he did, and then to turn over the residue of

the estate to the trust, which he failed to do. Any authority that the

trustee might have had to make distributions to himself and his

mother and sister did not exist under the terms of the will. Even if

respondent had funded the trust, the trust document did not authorize

self-dealing by way of loans.

¶ 16 Although he characterized respondent’s conduct as “dishonest,”

Rodes stated that he saw nothing in the records that suggested

respondent was aware that his conduct was improper or that he

attempted to conceal the transactions. Rodes also acknowledged that

respondent repaid the amounts, but stated that repayment did not

absolve him of the breach of duty.

¶ 17 Nadine testified that she had never seen the will or trust

documents, but that she understood that her brother was the executor.

She expected him to protect the estate and “make it grow.” She

understood that she, her mother, and her brother were the

beneficiaries of the estate. She did not know that her brother was

making loans to himself and would have objected if he had asked her

permission. She was aware that her brother used money from the

estate to buy their mother a new car, to make contributions to her

IRA, and to pay some of the real estate taxes on the building that

housed Marie’s. She had no objection to these expenditures of estate

funds. On the occasions when respondent paid her personal income

taxes, she gave permission for him to use estate funds. She did not

know if he used estate funds to pay his own taxes. She acknowledged

that when Marie’s was experiencing shortfalls and overdrafts, she

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asked respondent to fix the problem but did not know how he did it.

She assumed he used money from the estate. Nadine’s hiring of an

attorney and filing of a petition to terminate independent

administration was prompted by her discovery that respondent was

negotiating to sell Marie’s.

¶ 18 Lillian stated that respondent had informed her that he had taken

money from the estate, but he did not ask her permission to do so.

She did not tell Nadine that respondent had taken any money. She

also denied that respondent had used estate funds to keep Marie’s in

business.

¶ 19 Respondent stated that he had previously handled client funds and

he understood his duty as a fiduciary to segregate client funds from

his own property. He acknowledged that he used estate funds for his

own purposes, explaining that he believed that he was authorized to

do so as a beneficiary. Although he believed that he would have been

allowed to retain the funds, he chose to treat the withdrawals as loans

and to repay the estate. He testified that the attorney, Hayes, told him

that under independent administration, an executor could take

whatever actions he was authorized to take and make an accounting

when the estate was closed. He stated that Hayes did not tell him he

first needed to fund the trusts before he could take the actions he was

taking. He was unaware that there was any issue with the loans until

he received a letter from the ARDC. He denied any intent to convert

estate funds.

¶ 20 Chris Atsaves, vice president of investments at UBS Financial

Services, testified that he managed the account into which respondent

transferred the estate assets. He was familiar with the history of

transactions, including respondent’s loans to himself and transfers to

Marie’s. He understood that the funds advanced to Marie’s would be

repaid to the estate from the proceeds of the eventual sale of the

business. While respondent did not sign notes or specify interest rates

or terms of repayment when he transferred money to his personal or

law office accounts, Atsaves understood that these transfers were

personal loans. Respondent repaid these amounts. His first repayment

was several thousand dollars greater than the amount owed, and

Atsaves deemed the overage to represent interest on the loan.

Subsequent repayments did not include interest amounts because

respondent considered the interest offset by the approximately

$100,000 in unpaid rent owed to him as a part owner of the building

occupied by Marie’s. Atsaves was also aware that respondent used

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estate funds to open IRAs for himself, his wife, and Nadine; he repaid

the funds used for his own IRA and his wife’s, but not for Nadine’s.

¶ 21 Anthony Siragusa, another financial professional, testified that he

had known respondent for 50 years and that he was named in

respondent’s will to be executor of his estate. Respondent kept him

informed of his actions with regard to his father’s estate. Siragusa was

aware that respondent was using estate funds to keep Marie’s afloat

and that he was trying to sell the business as a going concern. Nadine

opposed any sale. Siragusa was also aware that respondent was

borrowing funds from the estate for his own use. Respondent kept

him informed so that if something happened to respondent, Siragusa

would make sure that a full accounting was made and any outstanding

debt repaid. Although he acknowledged that he had no information

on the terms or interest rates of the loans and that he did not hold a

promissory note, he was confident that he would have been able, if

necessary, to reconstruct the transactions.

¶ 22 The Hearing Board found that the will was the controlling

instrument, because the trust was never funded. Further, under the

will, respondent had no authority to lend money to himself. Even if

the trust had been funded, the terms of the trust did not authorize such

loans and, although respondent was authorized to distribute trust

funds to himself for certain specified purposes, he did not properly

document the transactions. The absence of promissory notes caused

the Hearing Board to “question” respondent’s characterization of the

transactions as loans. Respondent, an attorney, did not seek

clarification of his responsibilities from Hayes, the attorney for the

estate. Further, his self-dealing was not excused by the fact that he

used estate funds to benefit his mother and sister, or by the fact that

he repaid the funds he borrowed. Thus, the Hearing Board concluded

that respondent breached his fiduciary duty to the estate and its

beneficiaries.

¶ 23 The Hearing Board also found that because respondent had no

authority under either the will or the Probate Act to lend funds to

himself, he committed conversion when he took funds from the

estate. The Board concluded that because respondent failed “to follow

correct procedures, which failure eventually became the subject of

court proceedings,” his conduct was prejudicial to the administration

of justice in violation of Rule of Professional Conduct 8.4(a)(5) and

tended to defeat the administration of justice in violation of Supreme

Court Rule 770.

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¶ 24 On the issue of dishonesty, the Hearing Board concluded that

respondent did not intend to deceive or to defraud the estate or its

beneficiaries. He took no affirmative steps to conceal his actions, and

he repaid the amounts he borrowed. Indeed, repayment was complete

more than a year before his actions were reported to the ARDC. He

was unfamiliar with estate administration and did not appreciate the

separate roles of the will and trust documents or his separate roles as

executor and trustee. Thus, the Hearing Board concluded, he did not

violate Rule of Professional Conduct 8.4(a)(4).

¶ 25 The Hearing Board recommended that respondent be suspended

from the practice of law for four months.

¶ 26 Both parties appealed to the Review Board. Before the Review

Board, the Administrator argued that the Hearing Board erred by

finding that respondent did not violate Rule 8.4(a)(4) and by

recommending a suspension for four months rather than for one year.

Respondent argued that the Hearing Board erred by finding that he

breached his fiduciary duty to the estate and its beneficiaries and by

finding that his conduct amounted to conversion. In the alternative,

he argued that the appropriate discipline would be reprimand or

censure.

¶ 27 The Review Board concluded that in the absence of an attorney-

client relationship between respondent and the estate or its

beneficiaries, the charges of breach of fiduciary duty and conversion

could not serve as the basis for professional discipline in this case.

¶ 28 As a general matter, the Review Board discouraged the

Administrator’s use of breach of fiduciary duty as a free-standing

charge, absent an allegation of violation of a specific Rule of

Professional Conduct. The Board noted that breach of fiduciary duty

is not one of the specifically enumerated forms of misconduct in the

Rules and that as a general concept of tort liability, it encompasses a

wide variety of behavior, not all of which should be the basis for

professional discipline. Because the fiduciary duty in this case did not

arise from an attorney-client relationship and did not violate a specific

Rule, the Review Board stated that the charge had no basis “in law,”

that is, in the Rules of Professional Conduct.

¶ 29 Similarly, the Review Board stated that the only Rule of

Professional Conduct that would specifically encompass conversion

is Rule 1.15, which provides that “[a] lawyer shall hold property of

clients or third persons that is in a lawyer’s possession in connection

with a representation separate from the lawyer’s own property.” Ill.

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R. Prof. Conduct R. 1.15(a) (eff. Oct. 21, 2009). Again, the Review

Board concluded that, absent an attorney-client relationship,

respondent could not have violated this rule because he did not “hold”

the estate funds for a client or in connection with a representation.

¶ 30 Further, if the tort of conversion, as opposed to a violation of Rule

1.15, were to be the basis of professional discipline, the Review

Board stated that the Administrator should be required to prove the

elements of the tort by clear and convincing evidence, which was not

done in this case. In re Storment, 203 Ill. 2d 378, 390 (2002) (“In

attorney disciplinary proceedings, misconduct must be proved by

clear and convincing evidence.”). The Board criticized the suggestion

that an attorney could be disciplined for the wrongful deprivation of

another’s property, without proof of the other elements of the tort. In

addition, the Board observed, one cannot convert money unless it is

tangible, such as currency taken from a briefcase or a safe-deposit

box. For this proposition, the Board cited Sandy Creek Condominium

Ass’n v. Stolt & Egner, Inc., 267 Ill. App. 3d 291, 294 (1994)

(“Money may be the subject of conversion if the sum of money is

capable of being described as a specific chattel. [Citation.] However,

an action for the conversion of funds may not be maintained to satisfy

an obligation to pay an indeterminate sum of money. If such is the

case, the cause of action lies in debt, rather than conversion.”). Sandy

Creek, in turn, cites this court’s opinion in In re Thebus, 108 Ill. 2d

255, 260 (1985) (“It is ordinarily held, however, that an action for

conversion lies only for personal property which is tangible, or at

least represented by or connected with something tangible***.’ ”

(quoting 18 Am. Jur. 2d Conversion § 9, at 164 (1965))).

¶ 31 The Board concluded that because the Administrator did not plead

and prove either a violation of Rule 1.15 or commission of the tort of

conversion, the charge of conversion could not stand.

¶ 32 In sum, the Review Board reversed the Hearing Board’s decision

and recommended that the charges against respondent be dismissed

because the Administrator did not prove by clear and convincing

evidence that respondent violated the Rules of Professional Conduct

when he committed the alleged conversion and breach of fiduciary

duty.

¶ 33 ANALYSIS

¶ 34 The issues presented in this case are: (1) whether the

Administrator met the burden of proving by clear and convincing

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evidence that respondent’s actions with respect to his father’s estate

constituted a breach of fiduciary duty or conversion; and (2) if so,

whether his actions are professional misconduct that may be the basis

for the imposition of professional discipline.

¶ 35 The first question requires us to review the factual findings of the

Hearing Board under the manifest weight of the evidence standard. In

re Timpone, 208 Ill. 2d 371, 380 (2004). Respondent argues that he

did not breach his fiduciary duty or engage in conversion and that, in

any event, these charges were not proven by clear and convincing

evidence. The Administrator responds to this argument in its reply

brief, arguing that the Hearing Board’s findings of facts were correct.

¶ 36 The second question involves interpretation and application of the

Rules of Professional Conduct, which we review de novo. Id.

¶ 37 Factual Findings of Hearing Board

¶ 38 Breach of Fiduciary Duty

¶ 39 The Hearing Board found, and respondent does not deny, that he

was executor of his father’s estate and, as such, “was in a fiduciary

position that required him to exercise the highest degree of good faith

and fidelity toward the estate and toward its beneficiaries, and to

avoid placing his own interests above those of the estate.”

¶ 40 The Administrator argues that the Hearing Board’s finding of a

breach of fiduciary duty was correct because respondent “had no

authority under either his father’s will or Illinois probate law to lend

estate funds to himself yet he lent himself almost $450,000 over the

course of five years.”

¶ 41 Respondent argues that because the will provided for independent

administration of the estate under section 28-1 of the Probate Act of

1975 (755 ILCS 5/28-1 (West 2010)), he was authorized to act

without court approval. Further, he asserts that under section 28-10

of the Act, which provides that “the independent representative may

at any time or times distribute the estate to the persons entitled

thereto” (755 ILCS 5/28-10 (West 2010)), he was entitled to make

loans to himself because he would have been entitled to distribute a

portion of the estate to himself, without court approval or notice to

other beneficiaries. Respondent also relies on the language of the trust

document, which authorized the trustee to “make loans to the

fiduciary of any trust created by me or any member of my family ***

even though the trustee is such a fiduciary.” He states that this

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language gave him the authority to make loans of trust funds to

himself without notice or approval. Thus, respondent’s argument

concludes that the Administrator failed to prove a breach of fiduciary

duty by clear and convincing evidence.

¶ 42 The rules governing the fiduciary duty of an executor are well-

settled. “[T]he beneficiaries of an estate are intended to benefit from

the estate and are owed a fiduciary duty by the executor to act with

due care to protect their interests.” Gagliardo v. Caffrey, 344 Ill. App.

3d 219, 228 (2003). The executor’s duty is to “carry out the wishes of

the decedent,” acting in the utmost good faith to protect the interests

of the beneficiaries, “exercising at the very least that degree of skill

and diligence any reasonably prudent person would devote to [his]

own personal affairs.” Will v. Northwestern University, 378 Ill. App.

3d 280, 291-92 (2007). Ultimately, the executor’s duty is to

administer the assets of the estate so that any debts or obligations are

paid and the beneficiaries receive their just and proper benefits “ ‘in

an orderly and expeditious manner.’ ” Id. (quoting In re Estate of

Greenberg, 15 Ill. App. 2d 414, 424 (1957)). In addition, an executor

owes a duty of full disclosure to the beneficiaries under the testator’s

will. See In re Estate of Talty, 376 Ill. App. 3d 1082, 1089 (2007).

¶ 43 The father’s will named two beneficiaries: his wife, Lillian, and

the unfunded trust. As executor of his father’s will, respondent was

required to distribute his father’s personal property to Lillian and to

transfer all other estate assets to the trust. Then, in his role as trustee,

he was required to create two separate trusts. He did not transfer the

residue of the estate to the trust, as evinced by the fact that the checks

he drew on the account at USB Financial Services continued to list

the “Estate of George Karavidas” as the account holder. Thus, the

Hearing Board was correct in concluding that because the assets were

never transferred to the trust, the will is the controlling instrument

with respect to the transactions at issue.

¶ 44 We also agree with the Hearing Board that although the will

authorized independent administration, neither the will itself nor the

independent administration provision of the Probate Act (755 ILCS

5/28-1 (West 2010)), authorized respondent, as executor, to make

loans to himself or to use the estate assets as a line of credit for his

own benefit. Section 28-1 of the Probate Act permits an executor to

act on behalf of the estate without court approval; it does not permit

him to ignore the intent of the testator. The will gave the executor the

power to borrow money, not to lend it. It allowed the executor to

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“deal with” himself in his other role as trustee, but not to engage in

transactions with himself as an individual. The provision allowing

him to make distributions from the estate permitted such distributions

only to the named beneficiaries of the will—Lillian and the trust—not

to the eventual beneficiaries of the trust.

¶ 45 The facts of this case are similar to Prignano v. Prignano, 405 Ill.

App. 3d 801, 811-12 (2010), where the executor of the estate, who

was brother of the testator and co-owner of several businesses,

breached his fiduciary duty to carry out the express provisions of the

will. The will provided that the executor was to receive his late

brother’s share of the “assets” of a corporation owned by the brothers.

In addition to the assets of the business, the executor distributed to

himself his late brother’s share of the stock in the corporation. The

appellate court held that shares of stock are not assets of a

corporation; rather, they are units of ownership in the corporation. As

such, the stock was part of the residue of the estate, which was to be

distributed to the testator’s widow and their two minor children.

Thus, the executor “breached his fiduciary duty as executor to carry

out the express provisions of the will.” Id. at 811. In addition, because

the children’s share of the residue was to be placed in trust for them,

the executor also breached his fiduciary duty as trustee of the

children’s trusts “to secure for them the property that should have

formed the res of their trusts.” Id. at 812.

¶ 46 Similarly, in the present case, respondent breached his fiduciary

duty to carry out the express provisions of the will by failing to

transfer estate assets to the trust and by lending estate assets to

himself. Even if such loans had been permissible, his failure to

document the transactions as loans placed the assets of the estate at

risk if he were to die or become incompetent before the loans were

repaid.

¶ 47 Respondent also breached his fiduciary duty by failing to disclose

the transactions to his mother or sister. In Estate of Talty, the testator

named as executor his brother, with whom he co-owned an

automobile dealership and the real estate on which it was located. The

will named the testator’s wife as the sole residuary beneficiary, giving

the brother the right to purchase the testator’s share of the dealership,

subject to certain conditions, including an independent appraisal of

the value of the dealership. Estate of Talty, 376 Ill. App. 3d at 1084.

The executor obtained an appraisal that falsely stated the value of the

dealership and closed the sale to himself. In ensuing litigation, the

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circuit court found that although the testator “knowingly waived any

conflict of interest” when he appointed his brother and business co-

owner as his executor, the executor nevertheless acted in bad faith. Id.

at 1086. The appellate court affirmed, stating that the testator had

waived any conflict of interest by placing his brother in “multiple

capacities as buyer, seller, and fiduciary.” Further, the court observed

that “an executor can serve potentially conflicting interests without

exercising bad faith as a fiduciary.” Id. at 1089. However, the

executor breached his fiduciary duty of full disclosure by failing to

disclose to the residuary beneficiary information regarding the

appraisals of the business and the real estate and the closing dates for

the sales. Id. at 1089-90.

¶ 48 The elder Karavidas named his son as executor and successor

trustee, knowing that his son was also a beneficiary of the trust. Thus,

as in Talty, he waived any conflict of interest by placing respondent

in multiple capacities as executor, trustee, and beneficiary. However,

such a waiver does not relieve the respondent of an executor’s

fiduciary duty of full disclosure. The record clearly demonstrates that

respondent did not inform his mother, who was a beneficiary under

the will and trust, of his repeated taking of loans from the estate. He

also failed to disclose the transactions to his sister, who, while not a

direct beneficiary of the will, was an intended beneficiary of the trust

that he failed to fund with estate assets.

¶ 49 Respondent argues that his position is supported by the case of In

re Nagler, M.R. 23644 (May 17, 2010), in which the respondent

attorney, who drafted a will and trust for his father and served as

executor of his father’s estate, failed to follow the directions in the

will. He did not set up separate trusts for himself and his sister as

instructed, but rather allowed all of the funds to remain in one trust

account, keeping a mental note of the amount to which each was

entitled and making sure that he did not distribute more than one half

of the funds to himself. He also made a loan of trust funds to a friend,

without informing his sister of the transaction. Although he was

found to have committed other forms of misconduct, Nagler was not

found to have breached his fiduciary duty. Respondent argues that his

conduct was less egregious than the conduct charged in In re Nagler

and, thus, he should be found not to have breached his fiduciary duty.

¶ 50 The Hearing Board considered and rejected this argument, noting

the significant distinction between respondent and Nagler. In contrast

to Nagler, respondent was acting as executor of his father’s estate, not

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as a trustee. An executor has a duty of full disclosure. Estate of Talty,

376 Ill. App. 3d at 1089-90. Further, although Nagler failed to

separate the residuary trust into two separate trusts, he was operating

under the terms and conditions of his father’s trust document, which

gave broad discretion to the trustee. In the present case, respondent

was operating under the terms of his father’s will, which did not

permit him to make loans to himself.

¶ 51 Although the will was the operative instrument, respondent

nevertheless relies on the trust document to argue that he was entitled

to distribute trust assets to himself and that, therefore, he cannot have

breached his fiduciary duty by taking the same funds directly from the

probate estate. We reject the implicit suggestion that the funding of

the trust was a mere formality that could be dispensed with. Further,

although respondent as trustee did have the authority to make

distributions of trust funds to himself, that authority was not

unlimited. During his mother’s lifetime, he was authorized to

distribute trust funds to himself and his sister only for their “health,

support and education” and only after consideration of their “other

resources.” Additionally, as trustee, he was required to give “primary

consideration” to his mother’s needs. Thus, even if he had funded the

trust, he was not authorized to use the trust as his personal line of

credit.

¶ 52 Respondent’s explanation that he at no time owed the estate more

than one-third of its total original value is not persuasive. Even had

he carried out his father’s wishes, he was not entitled to one-third of

the estate. Rather, he would have eventually received one-half of the

remaining principal in the family trust upon the death of his mother,

provided that she did not exercise her testamentary power of

appointment to reduce his share. Indeed, it was entirely possible that

the care and support of his mother would consume the entire corpus

of the family trust.

¶ 53 We acknowledge respondent’s assertion that he also made

payments of estate funds to or on behalf of his mother and sister.

While these payments do tend to support his claim that he was not

acting to defraud the estate, but simply did not understand his

obligations as executor, these transactions do not negate his breach of

fiduciary duty. Indeed, they, too, were breaches of fiduciary duty

because they were unauthorized by the will.

¶ 54 Had respondent followed the instructions in his father’s will, the

estate could have been closed in a timely manner. Instead, he allowed

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the assets to remain in the probate estate for over five years and

engaged in numerous undocumented transactions, some of which

benefitted his mother and sister and some of which benefitted

himself. He did so without disclosing the transactions to the other

intended beneficiaries and without their consent. We find, therefore,

that the Hearing Board’s finding that respondent breached his

fiduciary duty as executor of his father’s estate was not against the

manifest weight of the evidence.

¶ 55 Conversion

¶ 56 The same conduct that was alleged to constitute a breach of

fiduciary duty—respondent’s unauthorized taking of estate funds in

the form of undocumented loans for his personal use—was also

alleged to constitute conversion. In effect, the respondent was charged

with breaching his fiduciary duty by means of converting estate funds.

The Hearing Board concluded that his conduct met the definition of

conversion.

¶ 57 Respondent argues that he did not engage in conversion because

he was entitled to use all or part of the estate funds and that his

mother and sister were not deprived of anything to which they were

entitled because they had no greater right to the funds than he did. He

acknowledges that he borrowed the funds from the estate, rather than

creating the trusts and then disbursing funds to himself as a

beneficiary of the family trust, but insists that no conversion took

place when he would have been allowed to use the funds if they had

been placed in the family trust. He asserts that the Administrator

failed to prove any of the elements of the common law tort of

conversion and that the Review Board correctly found that he did not

convert estate funds.

¶ 58 The Administrator responds that respondent cites no authority for

his assertion that he was entitled to use the estate funds or that his

actions, particularly the utter lack of documentation for the loans,

would have been permitted if the trust had been funded. Thus, his

taking of the funds, even with subsequent repayment, was conversion.

¶ 59 At common law, conversion is the “wrongful possession or

disposition of another’s property as if it were one’s own; an act or

series of acts or willful interference, without lawful justification, with

an item of property in a manner inconsistent with another’s right,

whereby that other person is deprived of the use and possession of the

property.” Black’s Law Dictionary 381 (9th ed. 2009).

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¶ 60 “This court has stated that ‘[a] conversion is any unauthorized act,

which deprives a man of his property permanently or for an indefinite

time ***.’ (Union Stock Yard & Transit Co. v. Mallory, Son &

Zimmerman Co. (1895), 157 Ill. 554, 563. In Bender v. Consolidated

Mink Ranch, Inc. (1982), 110 Ill. App. 3d 207, 213, the court said,

‘The essence of conversion is the wrongful deprivation of one who

has a right to the immediate possession of the object unlawfully held.’

In Jensen v. Chicago & Western Indiana R.R. Co. (1981), 94 Ill. App.

3d 915, 932, it was stated: ‘One claiming conversion must show a

tortious conversion of the chattel, a right to property in it, and a right

to immediate possession which is absolute ***.’ In Farns Associates,

Inc. v. Sternback (1979), 77 Ill. App. 3d 249, 252, the court said, ‘The

essence of an action for conversion is the wrongful deprivation of

property from the person entitled to possession.’ ” Thebus, 108 Ill. 2d

at 259-60.

¶ 61 In the context of a civil case, “ ‘[t]o prove conversion, a plaintiff

must establish that (1) he has a right to the property; (2) he has an

absolute and unconditional right to the immediate possession of the

property; (3) he made a demand for possession; and (4) the defendant

wrongfully and without authorization assumed control, dominion, or

ownership over the property.’ ” Loman v. Freeman, 229 Ill. 2d 104,

127 (2008) (quoting Cirrincione v. Johnson, 184 Ill. 2d 109, 114

(1998)).

¶ 62 However, when conversion is charged as a form of professional

misconduct, it has a more “specialized meaning.” Thebus, 108 Ill. 2d

at 259. Thus, the general rules as to the elements of the tort may be

altered to fit the requirements of the Rules of Professional

Responsibility. See id. at 261. For example, an attorney may be found

to have committed conversion when the balance in an account in

which client funds are being held falls below the amount then

belonging to clients. In re Cheronis, 114 Ill. 2d 527, 534-35 (1986).

This is true even though no client entitled to the funds has made a

demand for possession. Thus, in In re Lasica, No. 07-CH-125

(Review Board Jan. 22, 2010), the Review Board rejected the

attorney’s argument that demand for possession is a necessary

element of conversion in a disciplinary proceeding, observing that

“[a]ttorneys are not free to use funds that they hold on behalf of a

client or third party until such time as a demand for possession is

made.”

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¶ 63 In the context of a disciplinary proceeding where an attorney-

client relationship is involved, we use the term “conversion” as a term

of art and focus on the attorney’s conduct with respect to the property

or funds of the client or third party, not on the circumstances that

would be necessary to give rise to a claim in tort by the rightful

owner. See In re Rosin, 156 Ill. 2d 202, 206 (1993) (defining

conversion in the context of a disciplinary proceeding as “any

unauthorized act, which deprives a man of his property permanently

or for an indefinite time,” where the property at issue was the client’s

share of proceeds of a settlement (internal quotation marks omitted)).

Thus, when an attorney is acting as an attorney, he may be found to

have converted funds that are held in a trust account holding funds

owed to numerous clients, even though his misconduct does not fit

the common law definition of conversion.

¶ 64 As the Review Board correctly noted, respondent’s conduct did

not violate Rule 1.15(a) because the funds involved were neither

client funds nor funds held by respondent for a third person “in

connection with a representation.” Ill. R. Prof. Conduct R. 1.15(a)

(eff. Oct. 21, 2009). Thus, our term of art does not apply.

¶ 65 This raises the additional consideration that, at common law, not

all types of property are subject to being converted. See Thebus, 108

Ill. 2d at 260 (“ ‘It is ordinarily held, however, that an action for

conversion lies only for personal property which is tangible, or at

least represented by or connected with something tangible ***.’ ”

(quoting 18 Am. Jur. 2d Conversion, § 9, at 164 (1965))). Thus, if the

nonattorney executor of an estate were to help himself to a valuable

painting or piece of jewelry, he would not only be in breach of his

fiduciary duty, he would be liable in tort for conversion. However, the

Review Board observed that the funds that respondent “borrowed”

from the estate were not “capable of being described as a specific

chattel” and, thus, were not capable of being converted.

¶ 66 As established above in our discussion of breach of fiduciary

duty, respondent’s actions were indeed wrongful and without

authorization. In addition, he deprived the estate and its intended

beneficiary, the trust, of the funds for an indefinite period of time.

Because we have already found that respondent’s conduct with

respect to the estate funds was a breach of fiduciary duty, we need not

determine whether the means by which the breach was committed

may also be labeled as common law conversion.

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¶ 67 We briefly address the argument, made for the first time at oral

argument, that respondent could not have committed conversion of

funds from the estate or breached his fiduciary duty because the death

of George Karavidas “funded” the George Karavidas Trust and that

the trust document allowed the trustee to make loans.

¶ 68 The Administrator rightly points out that this is a change in the

respondent’s position before the Hearing Board and should not be

given any consideration. We also note that the assertion that estate

assets somehow automatically become trust principal upon the death

of a testator who has created an unfunded trust that is to be funded via

a pour-over will is unsupported by any citation to authority. Further,

respondent’s claim is contradicted by the fact that the investment

accounts continued to be held in the name of the “Estate of George

Karavidas,” not in the name of the trust.

¶ 69 The finding of the Hearing Board that respondent breached his

fiduciary duty is not against the manifest weight of the evidence. We

decline to determine whether his conduct might also be labeled as

conversion. The question remains whether this civil offense—for

which a civil remedy is available to aggrieved parties—is a proper

basis for professional discipline in this case.

¶ 70 Alleged Violations of Rules of Professional Conduct

¶ 71 The complaint states that respondent converted estate funds and

breached his fiduciary duty and that he violated Rules 8.4(a)(4) and

8.4(a)(5) of the Illinois Rules of Professional Conduct and Supreme

Court Rule 770. These charges are enumerated (1) through (5). This

is the Administrator’s standard way of stating charges, but it is not

entirely clear whether the respondent was being charged with five

separate types of misconduct, or he was being charged with violating

three separate rules by committing two types of misconduct, which

were, in turn, based on a single act.

¶ 72 We urge the Administrator to ensure that a complaint clearly and

unambiguously inform a respondent of the specific acts with which

he is charged and the specific rules that he is alleged to have violated

by engaging in those acts.

¶ 73 Supreme Court Rule 753(b) provides that a disciplinary complaint

“shall reasonably inform the attorney of the acts of misconduct he is

alleged to have committed.” Ill. S. Ct. R. 753(b) (eff. Sept. 1, 2006).

An accused attorney’s procedural due process rights, including the

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right to fair notice and the right to an opportunity to defend against all

charges, would be violated if an attorney were disciplined for

uncharged misconduct. In re Chandler, 161 Ill. 2d 459, 470 (1994).

When an attorney is accused of engaging in certain conduct, but that

accusation is not tethered to an alleged violation of a specific Rule of

Professional Conduct, it creates the risk that discipline might be

imposed for conduct that does not violate professional norms.

¶ 74 For example, in In re Mulroe, 2011 IL 111378, the respondent

attorney represented a friend in a dissolution proceeding, a matter

outside his usual areas of practice. He agreed to hold the proceeds

from the sale of the couple’s home until the allocation was

determined by the court. Id. ¶ 7. The Hearing Board found that he

converted client funds in violation of Rules 1.15(a) and (b) by failing

to hold the escrow funds separate from his own property and to

promptly deliver the funds upon demand by the rightful owner. In

addition, he violated Rule 8.4(a)(5) by engaging in conduct that was

prejudicial to the administration of justice and that brought the legal

profession into disrepute. Id. ¶ 12. However, the Hearing Board found

that the Administrator did not prove a violation of Rule 8.4(a)(4) by

clear and convincing evidence where the conversion “was a technical

one, not motivated by an intention to deprive” the rightful owner of

the funds. Id. The attorney had the financial means to deliver the

funds at all relevant times and honestly believed that he was not to

distribute the funds to the ex-wife until the issues on appeal were

resolved. Id.

¶ 75 This court rejected the Administrator’s argument that recklessness

in the handling of client funds is sufficient to satisfy the scienter

requirement of Rule 8.4(a)(4). Id. ¶ 19. While we acknowledged that

the holding of client funds “is a serious fiduciary duty and should not

be treated lightly,” we determined that “the question at hand is not

whether respondent committed conversion, but whether the

conversion constituted ‘conduct involving dishonesty, fraud, deceit,

or misrepresentation’ such that respondent violated Rule 8.4(a)(4).”

Id. ¶ 20. We declined to adopt a bright-line rule that reckless

conversion creates a presumption of dishonesty. Id. ¶ 23. We also

concluded that the Hearing Board’s finding of no dishonest intent

behind the conversion was not against the manifest weight of the

evidence. Id. ¶ 31. Thus, there was no violation of Rule 8.4(a)(4),

despite the conversion.

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¶ 76 In contrast, in In re Merriwether, 138 Ill. 2d 191 (1990), the

respondent attorney negotiated a settlement on behalf of a client in a

personal injury case. The client’s medical expenses had been paid by

the Illinois Department of Public Aid, which, thus, had a lien on the

settlement proceeds. He remitted to the client the funds to which she

was entitled, but despite repeated demands by the Department, failed

to remit the amount due under the lien. Id. at 194-96. The attorney

admitted that he used the money for personal purposes because he

was in a “financial predicament.” Id. at 198. As a result, the balance

in his client trust account fell below the amount of the lien. Id. at 197.

This commingling and conversion of funds involved “client money,”

but it did not involve money owed to the client; rather, it involved

funds owed to a state agency to reimburse it for funds expended on

the client’s behalf. Id. at 200. The Hearing Board found violations of

numerous provisions of the Code of Professional Responsibility. (The

Code of Professional Responsibility was replaced in 1990 by the

Rules of Professional Conduct.)

¶ 77 This court found that the attorney’s conduct resulted in his client’s

becoming subject of a body attachment order and a contempt

proceeding when the Department, not knowing that the attorney

retained a portion of the settlement amount, attempted to collect the

funds owed from the client. This conduct violated the Code by

inconveniencing the client. Id. at 200-01. See Ill. S. Ct. Code of Prof.

Res. R. 7-101(a)(3) (eff. July 1, 1980) (prohibiting conduct that may

damage or prejudice a client). In addition, the attorney also violated

the Code by acting dishonestly in his dealings with the Department

and by attempting to conceal his misdeeds. Merriwether, 138 Ill. 2d

at 201. See Ill. S. Ct. Code of Prof. Res. R. 1-102(a)(4) (eff. July 1,

1980) (prohibiting conduct involving dishonesty, fraud, deceit, or

misrepresentation). Thus, it was not the conversion per se that

constituted professional misconduct. It was the violations of several

provisions of the Code of Professional Conduct. Conversion was the

means of committing the violations.

¶ 78 Mulroe and Merriwether support the proposition that an

attorney’s breach of fiduciary duty or conversion does not, standing

alone, warrant the imposition of professional discipline. As the

Review Board noted in the present case, discipline for conduct

occurring outside the attorney-client relationship should be limited to

situations where the attorney’s conduct violates the Rules by

demonstrating “a lack of professional or personal honesty which

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render[s] him unworthy of public confidence.” In re Bruckner, No.

00-CH-12, at 30 (Hearing Board Aug. 8, 2001), approved and

confirmed M.R. 17722 (Nov. 28, 2001).

¶ 79 In sum, we hold that professional discipline may be imposed only

upon a showing by clear and convincing evidence that the respondent

attorney has violated one or more of the Rules of Professional

Conduct. Mere bad behavior that does not violate one of the Rules is

insufficient.

¶ 80 Supreme Court Rule 770

¶ 81 The Hearing Board concluded that respondent’s conversion of

estate funds “tended to defeat the administration of justice in

violation of Supreme Court Rule 771.” (Effective April 1, 2004, a

new Rule 771 was adopted and the former Rule 771, to which the

Hearing Board was referring, was renumbered as Rule 770.)

¶ 82 The Administrator argues that Rule 770 specifically provides that

“attorneys may be disciplined for conduct that does not violate the

Rules of Professional Conduct.” This argument focuses on the use of

the word “or” in Rule 770 to argue that discipline may be imposed on

an attorney either for violating the Rules or for engaging in conduct

that does not violate the Rules, but that defeats the administration of

justice or tends to bring the courts or the profession into disrepute.

¶ 83 We begin our analysis by noting that Rule 770 is a procedural rule

of this court, not a Rule of Professional Conduct. As we noted in In

re Thomas, 2012 IL 113035, ¶ 92:

“Supreme Court Rule 770 is not itself a Rule of Professional

Conduct. Rather, it is contained in article VII, part B, of our

rules, which governs ‘Registration and Discipline of

Attorneys.’ Rule 770 is titled ‘Types of Discipline’ and

provides that ‘[c]onduct of attorneys which violates the Rules

of Professional Conduct contained in Article VIII of these

rules or which tends to defeat the administration of justice or

to bring the courts or the legal profession into disrepute shall

be grounds for discipline by the court.’ [Citation.] The rule

then lists eight levels of discipline ranging from disbarment

to reprimand. Thus, one does not ‘violate’ Rule 770. Rather,

one becomes subject to discipline pursuant to Rule 770 upon

proof of certain misconduct.”

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¶ 84 We do not attach the significance to the word “or” that the

Administrator suggests. Aside from the placement of Rule 770 in

article VII of our court rules, which signifies the procedural nature of

the rule, the Rules of Professional Conduct are sufficiently broad to

encompass conduct that defeats the administration of justice. Indeed,

Rule 8.4(a)(5) prohibits conduct that is “prejudicial” to the

administration of justice. Ill. R. Prof. Conduct R. 8.4(a)(5) (eff. July

6, 2001). Further, one may bring the courts or the legal profession

into disrepute by violating any of the Rules. However, attorney

conduct that does not violate any of the Rules may not be the basis for

professional discipline.

¶ 85 In the past, we have referred to Rule 770 and its predecessor Rule

771 as if they were Rules of Professional Conduct. For example, in

In re Winthrop, we stated that the respondent attorney, who made a

false statement of material fact to opposing counsel, “violated both”

Rule of Professional Conduct 8.4(a)(4) and Supreme Court Rule 771.

In re Winthrop, 219 Ill. 2d 526, 558 (2006). A more precise statement

would have been that he violated Rule 8.4(a)(4) by making the false

statement and, thus, was subject to discipline pursuant to Rule 771.

¶ 86 We reiterate: by definition, violation of any of the Rules of

Professional Conduct may tend to defeat the administration of justice,

to bring the courts or the profession into disrepute, or both. If an

attorney is proven to have violated the Rules of Professional Conduct,

he is then subject to discipline under Supreme Court Rule 770. Rule

770 cannot support a separate charge against an attorney because it is

not a Rule of Professional Conduct; it governs the types of discipline

that may be imposed upon a showing of a violation of a Rule.

¶ 87 Rule of Professional Conduct 8.4(a)(5)

¶ 88 Respondent was charged with violating Rule 8.4(a)(5), which at

the relevant time enumerated nine types of professional misconduct.

In pertinent part:

“A lawyer shall not:

***

(3) commit a criminal act that reflects adversely on the

lawyer’s honesty, trustworthiness or fitness as a lawyer in

other respects.

(4) engage in conduct involving dishonesty, fraud,

deceit or misrepresentation.

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(5) engage in conduct that is prejudicial to the

administration of justice.” Ill. R. Prof. Conduct R. 8.4(a)

(eff. July 6, 2001).

¶ 89 Depending on the facts of the case, an attorney’s breach of

fiduciary duty might involve criminal conduct, which could subject

the attorney to discipline under subsection (3), or it could involve

dishonesty, fraud, deceit, or misrepresentation, subjecting him to

discipline under subsection (4). In the present case, the Administrator

charged respondent with violating subsection (5).

¶ 90 The Hearing Board stated that respondent’s failure to properly

document the loans was prejudicial to the administration of justice in

violation of Rule 8.4(a)(5) because his failure to properly document

the loans “eventually became the subject of court proceedings.”

¶ 91 In In re Vrdolyak, 137 Ill. 2d 407, 425 (1990), we interpreted this

rule as requiring proof of actual prejudice to the administration of

justice. Vrdolyak, an attorney who was also a Chicago alderman,

operated under a conflict of interest when he represented a client in

a dispute with the city. He did not, however, violate Disciplinary Rule

1-102, which forbade engaging in “conduct that is prejudicial to the

administration of justice” Ill. S. Ct. Code of Prof. Res. R. 1-102(a)(5)

(eff. July 1, 1980)), because “clear and convincing evidence that the

administration of justice was, indeed, prejudiced” was lacking.

Vrdolyak, 137 Ill. 2d at 425.

¶ 92 Thus, in In re Storment, 203 Ill. 2d 378 (2002), we found that the

Hearing and Review Boards’ conclusion that the respondent attorney

had not violated Rule 8.4(a)(5) was not against the manifest weight

of the evidence, despite his violation of Rule 1.5(f), which required

a client’s written agreement to an attorney fee-sharing arrangement.

The violation of the writing requirement had no impact on the

attorney’s representation of the client or on the outcome of the case.

Thus, the record lacked clear and convincing evidence of any

prejudice to the administration of justice. Id. at 397-98.

¶ 93 In contrast, in In re Cutright, 233 Ill. 2d 474 (2009), the

respondent attorney was found to have engaged in conduct prejudicial

to the administration of justice in violation of Rule 8.4(a)(5) when he

neglected an estate of which he was executor, allowing it to remain

open for 17 years. Id. at 485. The actual prejudice to the

administration of justice was that two heirs died before ever receiving

their share of the estate and other heirs were forced to wait 17 years

before receiving any distribution. Id. at 486.

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¶ 94 The attorney conduct at issue in In re Thomas was also prejudicial

to the administration of justice in violation of Rule 8.4(a)(5). The

respondent attorney, who had been suspended from practicing law,

appeared before the Seventh Circuit to represent a corporation of

which he was the president and sole shareholder. We noted that the

corporation had filed for bankruptcy and that any recovery that might

have been made in the litigation would have been part of the

bankruptcy estate. Thus, because the respondent represented only his

own interests as a shareholder, and not the interests of the bankrupt

corporation’s creditors, his conduct did indeed prejudice the

administration of justice. Thomas, 2012 IL 113035, ¶ 91. This was so

even though his conduct did not result in actual harm to the creditors;

his conduct undermined the judicial process and, thus, prejudiced the

administration of justice.

¶ 95 Attorney Thomas also engaged in conduct that prejudiced the

administration of justice by continuing to represent other clients after

the date of his suspension. This conduct placed the interests of his

clients in jeopardy because his unauthorized practice of law could

have resulted in a default judgment for the opposing party. Id. ¶ 123.

¶ 96 In the present case, the Hearing Board concluded that

respondent’s sister’s filing of a motion in the probate case implicated

the judicial process, so that respondent’s conduct was prejudicial to

the administration of justice. However, the record reveals no conduct

by respondent regarding the motion to terminate independent

administration or the later motion to replace him as executor that

could have undermined the judicial process. The loans were made and

repaid in full before her papers were filed. His breach of fiduciary

duty, while not acceptable conduct for any executor, had no actual or

potential effect on the administration of justice.

¶ 97 We, therefore, agree with the Review Board that respondent’s

conduct, because he was not acting as an attorney and he was not

involved in the judicial process at the time of the breach, did not

undermine the administration of justice. While an attorney’s breach

of fiduciary duty owed to a nonclient could constitute an act that is

prejudicial to the administration of justice, this did not occur in this

case. Further, if an attorney is to be disciplined for such conduct, the

Administrator must, as a matter of due process, plead and prove that

the breach of fiduciary duty had a prejudicial effect on the

administration of justice. To the extent that our earlier decisions state

or imply otherwise, they are hereby overruled.

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¶ 98 Rule of Professional Conduct 8.4(a)(4)

¶ 99 Rule 8.4(a) lists nine separate acts that constitute misconduct. The

Administrator charged respondent with violating Rule 8.4(a)(4),

engaging in “conduct involving dishonesty, fraud, deceit, or

misrepresentation.” The Hearing Board found no violation of this rule

despite respondent’s breach of his fiduciary duty. We agree.

¶ 100 Under the manifest weight of the evidence standard of review, we

give deference to the factual findings of the Hearing Board, because

the Hearing Board is in a position to observe the witnesses’

demeanor, judge their credibility, and resolve conflicting testimony.

Timpone, 208 Ill. 2d at 380.

¶ 101 We see no reason in the present case to reject the Hearing Board’s

findings. The record suggests that respondent did not fully understand

his obligations as executor and trustee, not having practiced in this

area, and that he may have been given confusing legal advice (or the

questions he posed to his legal advisor were not sufficiently detailed

to elicit correct advice). Whatever the case, there is no suggestion that

he acted to deceive or to defraud; at most, he was careless in his

duties.

¶ 102 CONCLUSION

¶ 103 In sum, before professional discipline may be imposed under

Supreme Court Rule 770, the Administrator must demonstrate that

the attorney violated the Rules of Professional Conduct. To the extent

that any of our prior cases suggest that an attorney may be subjected

to professional discipline for conduct that is not prohibited by the

Rules of Professional Conduct or defined as misconduct therein, we

hereby reject such a suggestion. As a matter of due process, an

attorney who is charged with misconduct and faces potential

discipline must be given adequate notice of the charges, including the

rule or rules he is accused of violating. Personal misconduct that falls

outside the scope of the Rules of Professional Conduct may be the

basis for civil liability or other adverse consequences, but will not

result in professional discipline. We, therefore, accept the

recommendations of the Review Board and dismiss the charges

against respondent.

¶ 104 Charges dismissed.

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¶ 105 JUSTICE THOMAS, dissenting:

¶ 106 The majority holds that, although respondent breached his

fiduciary duty in no less than four distinct ways while serving as the

executor of his late father’s $700,000 estate, he nevertheless is

immune from professional discipline because none of his misconduct

violated a specific Rule of Professional Conduct. According to the

majority, “before professional discipline may be imposed under

Supreme Court Rule 770, the Administrator must demonstrate that

the attorney violated the Rules of Professional Conduct.” Supra

¶ 103. By way of corollary, the majority then adds that, “[t]o the

extent that any of our prior cases suggest that an attorney may be

subjected to professional discipline for conduct that is not prohibited

by the Rules of Professional Conduct or defined as misconduct

therein, we hereby reject such a suggestion.” Supra ¶ 103.

¶ 107 The problem with the majority’s reasoning is that this court has

not merely suggested that an attorney may be subjected to

professional discipline for conduct that is not specifically prohibited

by the Rules of Professional Conduct. On the contrary, this court has

expressly held as much. In In re Rinella, 175 Ill. 2d 504 (1997), this

court began its analysis by “reject[ing] respondent’s contention that

attorney misconduct is sanctionable only when it is specifically

proscribed by a disciplinary rule.” Id. at 514. In doing so, this court

explained that “the standards of professional conduct enunciated by

this court are not a manual designed to instruct attorneys what to do

in every conceivable situation.” Id.

¶ 108 Quite notably, the foregoing portion of Rinella is not, as the

majority would have us believe, anchored in an imprecise reading of

Rule 770 (then Rule 771). In fact, this portion of Rinella is not

anchored in Rule 770 at all. Rather, Rinella is simply an articulation

of this court’s understanding of its own rules. And as Rinella points

out, that understanding was memorialized in the 1990 preamble to the

Rules of Professional Conduct themselves, which states in relevant

part:

“ ‘Violation of these rules is grounds for discipline. No set

of prohibitions, however, can adequately articulate the

positive values or goals sought to be advanced by those

prohibitions. This preamble therefore seeks to articulate those

values ***. Lawyers seeking to conform their conduct to the

requirements of these rules should look to the values

described in this preamble for guidance in interpreting the

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difficult issues which may arise under the rules.’ ” Id. at 514-

15 (quoting Ill. R. Prof. Conduct, Preamble).

According to Rinella, “[t]he preamble *** likens the practice of law

to a public trust, and charges lawyers with maintaining public

confidence in the system of justice by acting competently and with

loyalty to the best interests of their clients.” Id. at 515. Consequently,

Rinella explained, it is appropriate to look not just to the specific

language of the Rules themselves but also to the principles set forth

in the preamble in determining whether an attorney’s conduct is

sanctionable. Id. at 514-15.

¶ 109 Although it is nowhere mentioned by the majority, Rinella is of

paramount importance in this case. Indeed, once Rinella is taken into

account, the majority’s reading of Rule 770 becomes untenable.

Again, Rule 770 provides, in relevant part:

“Conduct of attorneys which violates the Rules of

Professional Conduct contained in article VIII of these rules

or which tends to defeat the administration of justice or to

bring the courts or the legal profession into disrepute shall be

grounds for discipline by the court.” Ill. S. Ct. R. 770 (eff.

Apr. 1, 2004).

Now on its face, this language would seem to state very plainly that

there are two categories of conduct for which an attorney may be

disciplined by the court: (1) conduct “which violates the Rules of

Professional Conduct contained in article VIII of these rules,” and (2)

conduct “which tends to defeat the administration of justice or to

bring the courts or the legal profession into disrepute.” Indeed, such

a reading is compelled by numerous well-settled canons of

construction, not the least of which are that clear and unambiguous

language must be enforced as written (Hines v. Department of Public

Aid, 221 Ill. 2d 222, 230 (2006)) and that a statute or rule should be

construed, wherever possible, such that no word, clause, or sentence

is rendered meaningless or superfluous (People v. Jones, 168 Ill. 2d

367, 375 (1995)).

¶ 110 Yet the majority’s reading of Rule 770 turns both of these canons

on their heads. According to the majority, though Rule 770 clearly

identifies two distinct categories of conduct for which an attorney

may be disciplined by the court (conduct that violates a rule and

conduct that tends to defeat the administration of justice or to bring

the courts or the legal profession into disrepute), in fact, Rule 770

identifies only one category (conduct that violates a rule). This

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reading renders the phrase “or which tends to defeat the

administration of justice or to bring the courts or the legal profession

into disrepute” entirely meaningless. Indeed, if the majority’s reading

of Rule 770 is correct, what possible reason is there for the inclusion

of that phrase in the rule? The fact is, the majority’s reading of Rule

770 is not driven by the plain language of that rule but rather by the

majority’s conviction that due process prohibits an attorney from

being “subjected to professional discipline for conduct that is not

prohibited by the Rules of Professional Conduct or defined as

misconduct therein.” Supra ¶ 103. But this is the very argument we

rejected outright in Rinella. See Rinella, 175 Ill. 2d at 514 (rejecting

respondent’s argument that “imposing *** sanction[s] under these

circumstances would violate due process because [respondent] did

not have adequate notice that his conduct was prohibited”). In other

words, the majority’s entire reading of Rule 770 stems from a false

premise.1

¶ 111 Once Rinella’s holding is taken into account, Rule 770 makes

perfect sense on its face, and it becomes easy to give full effect to

every one of its words, rather than to only half of them. Again,

Rinella makes crystal clear both that “the standards of professional

conduct enunciated by this court are not a manual designed to instruct

attorneys what to do in every conceivable situation” and that attorneys

may be sanctioned for engaging in misconduct that is not “specifically

proscribed by a disciplinary rule.” In light of this holding, it should

come as no surprise that Rule 770, which authorizes the imposition

of discipline for attorney misconduct, authorizes it both for

“[c]onduct of attorneys which violates the Rules of Professional

Conduct” and for conduct that “tends to defeat the administration of

justice or to bring the courts or the legal profession into disrepute.”

1

The majority cites this court’s recent statement from In re Thomas that

“one does not ‘violate’ Rule 770. Rather, one becomes subject to discipline

pursuant to Rule 770 upon proof of certain misconduct.” Supra ¶ 83

(quoting In re Thomas, 2012 IL 113035, ¶ 92). Of course, this statement

does not settle the question at hand; it raises it: What “certain misconduct”

subjects one to discipline pursuant to 770? I believe that question is

answered clearly both in Rinella and in Rule 770 itself: conduct which

violates the Rules of Professional Conduct and conduct that, though not

violating a specific Rule of Professional Conduct, tends to defeat the

administration of justice or to bring the courts or the legal profession into

disrepute.

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Indeed, Rule 770 reflects and enables the very policy that the court

articulated in Rinella. The two go hand-in-hand.

¶ 112 Now I recognize that, in 2010, the Rules of Professional Conduct

were overhauled and that, with the overhaul, came a whole new

preamble. This is of no consequence, however, for at least two

reasons. First, all of respondent’s conduct in this case occurred prior

to the 2010 overhaul, which means that at all relevant times

respondent was operating under the very rules (and preamble) that the

court construed in Rinella. But even if that were not the case, the

preamble enacted in 2010 continues to reflect this court’s belief that

“the standards of professional conduct enunciated by this court are

not a manual designed to instruct attorneys what to do in every

conceivable situation.” Rinella, 175 Ill. 2d at 514. Indeed, paragraph

16 of the 2010 preamble expressly states that the rules “do not ***

exhaust the moral and ethical considerations that should inform a

lawyer, for no worthwhile human activity can be completely defined

by legal rules.” Ill. R. Prof. Conduct (2010), Preamble, ¶ 16 (eff. Jan.

1, 2010). Thus, there is absolutely no reason to believe this court’s

understanding of its rules has in any way changed since Rinella.

¶ 113 In sum, I am convinced that, contrary to the majority’s

conclusion, an attorney absolutely may be disciplined for misconduct

that is not specifically set forth in our Rules of Professional Conduct.

That was this court’s express holding in Rinella, and it is a policy

clearly reflected in the plain language of Rule 770.

¶ 114 The next question is whether respondent’s conduct in this case

justifies the imposition of professional discipline. I am convinced that

it does. Again, this court has expressly held that an attorney may be

subject to professional discipline for misconduct that is not

specifically proscribed by a disciplinary rule, and Rule 770 authorizes

the imposition of discipline for “[c]onduct of attorneys which ***

tends to defeat the administration of justice or to bring the courts or

the legal profession into disrepute.” Ill. S. Ct. R. 770 (eff. Apr. 1,

2004). There is no question that respondent’s conduct in this case

tends to bring the legal profession into disrepute. As the majority

itself points out, respondent, a licensed attorney, engaged in

numerous and serious breaches of his fiduciary duty while acting as

executor of his father’s $700,000 estate. These breaches included (1)

not funding the various trusts as required by the will but instead

keeping the estate open and lending nearly $450,000 in estate assets

to himself for his own personal benefit (supra ¶ 46); (2) failing to

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document any of these personal loans and thereby placing the assets

of the estate at risk (supra ¶ 46); (3) failing to disclose to any of the

estate beneficiaries that he was treating the estate as a personal line

of credit (supra ¶ 47); and (4) making unauthorized distributions out

of the estate (supra ¶ 53). These breaches extended over a period of

five years, and they came to an end only after respondent’s sister, a

co-beneficiary of the estate, learned of respondent’s conduct and filed

a petition to terminate independent administration. Supra ¶¶ 4-9.

¶ 115 The 1990 preamble states that the “practice of law is a public

trust” and that “[l]awyers seeking to conform their conduct to the

requirements of these rules should look to the values described in this

preamble for guidance.” Ill. R. Prof. Conduct, Preamble. Among the

values articulated in the 1990 preamble is that lawyers should

“maintain[ ] public confidence in the system of justice by acting

competently and with loyalty to the best interests of their clients.” Id.

Similarly, paragraph 5 of the 2010 preamble now states that “[a]

lawyer’s conduct should conform to the requirements of the law, both

in professional service to clients and in the lawyer’s business and

personal affairs.” Ill. R. Prof. Conduct (2010), Preamble, ¶ 5 (eff. Jan.

1, 2010). The majority’s own analysis confirms that respondent’s

conduct in this case did not accomplish any of these things. On the

contrary, respondent’s conduct undermined confidence in the legal

profession, displayed a profound lack of loyalty to the best interests

of those to whom he was acting as fiduciary, and certainly did not

conform to the requirements of the law governing fiduciary

relationships. And while this may have been only a “personal affair,”

it is worth noting that, as far as personal affairs go, the administration

and execution of an estate is about as closely connected to the formal

legal process as one can get. Historically, estate executors and

administrators served formally as agents of the court itself, exercising

by delegation the court’s power and the court’s responsibility over the

estate. See Will v. Northwestern University, 378 Ill. App. 3d 280, 292

(2007). The rise of independent administration has weakened that

connection over the years, but the fact remains that even independent

executors and administrators are discharging responsibilities that are

closely connected with and directly serve the legal system. All this to

say that respondent’s conduct in this case, while technically

“personal,” also bore a very close connection to the profession he

occupies. Accordingly, a higher standard of conduct was to be

expected than what respondent displayed here.

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¶ 116 The Hearing Board recommended that respondent’s law license

be suspended for four months. The Administrator is asking this court

to suspend it for one year. In light of the mitigating factors that are

present in this case—e.g., that respondent repaid everything he

borrowed and apparently at no time acted with an intent to deceive or

defraud—I believe the Hearing Board’s recommendation is

appropriate, and that is the judgment I would support in this case.

¶ 117 For these reasons, I respectfully dissent.

¶ 118 JUSTICE KARMEIER joins in this dissent.

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