In Re Rosin

CHIEF JUSTICE MILLER, dissenting:

The respondent, Joseph Rosin, was charged in a two-count complaint with commingling and converting client funds (count I) and commingling and converting interest earned on client funds (count II). The majority dismisses both counts, finding the evidence of the respondent’s wrongdoing insufficient to sustain the charges against him. Unlike the majority, I believe that the allegations of the complaint were established by the record in this case, and accordingly I dissent.

The parties’ evidence, which was largely stipulated, reveals that the respondent would deposit the proceeds of judgments or settlements in his firm’s general business account and issue to his clients checks drawn on that account for the client’s share of the award. From time to time the balance in the firm’s account would fall below the amount then payable to clients. No check was ever dishonored, however, for a line of credit extended by the bank to the respondent was always more than sufficient to cover any shortfall in the account. On other occasions, clients would not immediately negotiate the checks they had received from the respondent; as a consequence, the law firm’s account would be credited with interest attributable to those client funds. These arrangements formed the basis for the charges filed against the respondent.

The majority concludes that the respondent should not be found guilty of commingling client funds with his own funds because the conduct charged here preceded this court’s decision in In re Elias (1986), 114 Ill. 2d 321 . The majority notes that the respondent established a separate client trust account after Elias “expressly clarified that it is mandatory for an attorney to establish and maintain” such an account regardless of the manner in which the attorney distributes client funds. (156 Ill. 2d at 209.) The majority further asserts that the respondent’s procedures functioned in much the same way as a separate trust account.

Contrary to the majority’s view, the rule against commingling client funds was not in need of clarification prior to this court’s decision in Elias. Disciplinary Rule 9— 102(a) of the Code of Professional Responsibility provided, throughout the period relevant here:

“All funds of clients paid to a lawyer or law firm, including funds belonging in part to a client and in part presently or potentially to the lawyer or law firm, shall be deposited in one or more separate identifiable trust accounts in a bank or savings and loan association maintained in the State in which the law office is situated.” 107 Ill. 2d R. 9— 102(a).

Rule 9 — 102(a) took effect on July 1, 1980. Even before that time, however, this court had recognized the obligation of attorneys to maintain the separate identity of client funds. (See, e.g., People ex rel. Chicago Bar Association v. Hachtman (1932), 350 Ill. 326 ; In re Bloom (1968), 39 Ill. 2d 250 .) Thus, in In re Clayter (1980), 78 Ill. 2d 276 , a disciplinary matter decided prior to the effective date of the Code of Professional Responsibility, this court took the “opportunity to admonish the bar of this State that it is absolutely impermissible for an attorney to commingle his funds with those of his client or with money he holds as a fiduciary.” Clayter, 78 Ill. 2d at 278-79 .

This court’s decision in Elias simply reaffirmed these principles, which at that time were expressed by Rule 9— 102(a):

“It is manifest that this provision is mandatory, admitting of no exceptions for any reason. Repeatedly, this court has held that the foregoing provision embodies an unambiguous requirement that an attorney must establish and maintain a separate, identifiable trust account into which any and all funds belonging, in whole or in part, to clients are to be deposited regardless of the manner in which an attorney chooses to handle final disbursement of these funds. In re Cutrone (1986), 112 Ill. 2d 261, 268 ; In re Enstrom (1984), 104 Ill. 2d 410, 417-18 ; In re Cohen (1983), 98 Ill. 2d 133, 139 .” Elias, 114 Ill. 2d at 332 .

The respondent’s practice here of depositing the proceeds of judgments and settlements in his firm’s general business account and paying clients their shares of the awards with checks drawn on that account clearly represented commingling. Clients did not receive the cash, bank drafts, or money orders mentioned by the concurring justice, but checks drawn on an account containing both the proceeds of client awards and the law firm’s own operating funds. Notably, the respondent makes no challenge to the Hearing Board’s and Review Board’s determinations that his handling of client funds violated Rule 9 — 102(a). Given the clear evidence in this case, together with the respondent’s acknowledgment that he was in violation of Rule 9 — 102(a), I would uphold the Hearing Board’s and Review Board’s determinations that the respondent was guilty of commingling, as alleged in count I of the complaint.

Less clear is the question whether the respondent was guilty of the conversion of client funds during the periods when the balance of the firm’s account fell below the amount then belonging to clients. The respondent correctly notes that no client’s check was ever dishonored, for the substantial line of credit extended to the respondent by his bank was more than sufficient to cover any overdrafts that occurred during the time in question. The majority agrees with the respondent that the existence of the line of credit effectively prevented the conversion of any client funds during that period.

Conversion is established upon a showing that the balance in an account in which client funds are being held falls below the amount then belonging to clients. (In re Cheronis (1986), 114 Ill. 2d 527, 534-35 ; In re Young (1986), 111 Ill. 2d 98, 102-03 .) We have not previously considered, however, the effect of a line of credit, or other form of overdraft protection, on the operation of that general rule.

In light of the respondent’s practice of immediately remitting to a client the client’s share of a judgment or settlement, the balance of the respondent’s business account might have innocently fallen below the total amount belonging to clients if a client happened to present his check for payment before the respondent’s bank had collected the proceeds of that particular award. In certain instances, however, it appears that the account balance fell below the necessary level even after the proceeds of an award had been collected by the respondent’s bank. Applying the principle that conversion occurs once the balance in the account falls below the amount of client funds being held in the account, one must conclude that conversion occurred at least on those occasions. Although the line of credit extended to the respondent by his bank would have protected clients against any loss when the respondent’s commingled account was overdrawn, the line of credit would not have prevented conversion from occurring in the first instance. Of course, termination of the line of credit, for whatever reason, would have placed those client funds in jeopardy. See In re Clayter (1980), 78 Ill. 2d 276, 281 .

Count II of the complaint charged the respondent with the commingling and conversion of interest earned on client funds in his possession. The majority concludes that the respondent is not guilty of these charges. Addressing only the case of client Penelope Bell, who waited seven months to deposit a $162,000 check issued by the respondent, the majority believes that Bell was not entitled to the interest earned on that sum because she could have immediately negotiated her check yet chose not to do so. The majority emphasizes that the respondent had no role in determining when Bell finally decided to negotiate the check.

The Review Board properly found the respondent guilty of the commingling and conversion of interest earned on client funds deposited in the law firm’s general business account. It is no answer to say, as the majority does, that a client must forfeit whatever right he might have to interest earned on his funds simply because he fails to immediately negotiate a check issued to him. The respondent should not have commingled client funds with his own funds in the first place, and certainly he could gain no greater right to the interest earned on client funds through that arrangement than if he had initially placed those funds in a separate trust account. Attorneys do not somehow become entitled to retain for their own use interest earned on client funds merely by commingling them with their own funds, as the respondent did here. In this State, the appropriate beneficiary of interest earned on a client’s funds is the individual client himself or the Lawyers Trust Fund of Illinois, as the administrator of the interest on lawyers’ trust accounts (IOLTA) program. (See 107 Ill. 2d R. 9 — 102(d); 134 Ill. 2d Rules 1.15(d), (e).) The record here shows that the respondent’s firm retained the interest earned on client funds held on deposit in the firm’s account. For these reasons, I believe that the allegations of count II of the complaint were established by the evidence in this case.

The respondent’s primary offense was his failure to maintain a separate client trust account. Misconduct of this type creates a substantial risk of harm to clients. (In re Clayter (1980), 78 Ill. 2d 276, 281 .) The applicable rules are clear and unambiguous, designed to forestall the potential problems that may arise from those activities. Moreover, it may be noted that the respondent was previously suspended from the practice of law for a period of two years, for misconduct unrelated to the present charges. (See In re Rosin (1987), 118 Ill. 2d 365 .) In the present case, however, the respondent’s actions apparently were motivated by nothing more than what might be termed a “misguided sense of efficiency” (In re Walner (1988), 119 Ill. 2d 511, 525 ). Because of the line of credit extended to the respondent by his bank, none of the respondent’s clients ever incurred any loss, temporary or permanent, as a consequence of the respondent’s commingling and conversion of client funds. In addition, the respondent has made restitution of $7,374.83 to client Bell for the amount of interest earned by the respondent on her award; separately, the respondent has paid .the Lawyers Trust Fund of Illinois the sum of $5,770.74, which represents interest earned on other client funds held by the respondent. Like the Hearing Board and the Review Board, I believe that censure is the appropriate sanction here.