{ "id": 5557041, "name": "In re BRIAN J. DEMUTH, Attorney, Respondent", "name_abbreviation": "In re Demuth", "decision_date": "1988-12-15", "docket_number": "No. 67039", "first_page": "1", "last_page": "15", "citations": [ { "type": "official", "cite": "126 Ill. 2d 1" } ], "court": { "name_abbreviation": "Ill.", "id": 8772, "name": "Illinois Supreme Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "91 Ill. 2d 413", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3091622 ], "pin_cites": [ { "page": "428" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/91/0413-01" ] }, { "cite": "108 Ill. 2d 445", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3129439 ], "weight": 2, "pin_cites": [ { "page": "453-54" }, { "page": "451" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/108/0445-01" ] }, { "cite": "111 Ill. 2d 105", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3166366 ], "pin_cites": [ { "page": "117" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/111/0105-01" ] }, { "cite": "71 Ill. 2d 263", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5449590 ], "pin_cites": [ { "page": "276" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/71/0263-01" ] }, { "cite": "97 Ill. 2d 127", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5516292 ], "pin_cites": [ { "page": "132" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/97/0127-01" ] }, { "cite": "114 Ill. 2d 527", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5542454 ], "pin_cites": [ { "page": "535" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/114/0527-01" ] }, { "cite": "125 Ill. 2d 531", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5555467 ], "pin_cites": [ { "page": "544" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/125/0531-01" ] }, { "cite": "93 Ill. 2d 285", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3102559 ], "year": 1988, "pin_cites": [ { "page": "296" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/93/0285-01" ] }, { "cite": "103 Ill. 2d 123", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3152278 ], "opinion_index": 0, "case_paths": [ "/ill-2d/103/0123-01" ] }, { "cite": "89 Ill. 2d 247", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5493135 ], "weight": 2, "pin_cites": [ { "page": "251" }, { "page": "255" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/89/0247-01" ] }, { "cite": "125 Ill. 2d 546", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5555145 ], "weight": 2, "pin_cites": [ { "page": "555-56" }, { "page": "560" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/125/0546-01" ] }, { "cite": "118 Ill. 2d 365", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 3187941 ], "weight": 3, "pin_cites": [ { "page": "381" }, { "page": "381" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/118/0365-01" ] }, { "cite": "122 Ill. 2d 531", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 5550051 ], "weight": 2, "pin_cites": [ { "page": "538" }, { "page": "538" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/122/0531-01" ] } ], "analysis": { "cardinality": 844, "char_count": 20816, "ocr_confidence": 0.76, "pagerank": { "raw": 1.407155180764643e-07, "percentile": 0.6462509976450365 }, "sha256": "fb2efcc29d28f1253e07ed01b2ef25ee93dc21f4b2cf2c4281c60aa74566fdcd", "simhash": "1:7b31d1e224e0516a", "word_count": 3340 }, "last_updated": "2023-07-14T17:14:55.990409+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "In re BRIAN J. DEMUTH, Attorney, Respondent." ], "opinions": [ { "text": "JUSTICE STAMOS\ndelivered the opinion of the court:\nThis is a disciplinary proceeding against respondent, Brian J. Demuth. On March 3, 1986, the Administrator of the Attorney Registration and Disciplinary Commission filed a three-count complaint with the Hearing Board, charging respondent with violations of several provisions of the Code of Professional Responsibility (the Code) (107 Ill. 2d R. 1 \u2014 101 et seq.). In a report and recommendation filed November 4, 1987, the Hearing Board found that respondent had committed the following misconduct: engaging in a conflict of interest by representing both parties to a loan transaction; neglect of a legal matter; conversion; and entering into a prohibited business transaction with a client. The Hearing Board recommended that respondent be suspended from the practice of law for 18 months and until further order of court.\nBoth the Administrator and respondent filed exceptions to the report and recommendation. By order dated March 18, 1988, the Review Board affirmed the findings and conclusions of the Hearing Board, but recommended respondent be suspended for a period of two years. We granted respondent\u2019s petition for leave to file exceptions to the Review Board\u2019s recommendation. 107 Ill. 2d R. 753(e)(5).\nFACTS\nRespondent was admitted to practice law in Illinois on April 29, 1977. The transactions that gave rise to this proceeding occurred in 1980. They involved three individuals: respondent, Charles Pinckard, and Dr. Sabah Khalifa. (In addition, respondent introduced testimony concerning a transaction involving Pinckard, Khalifa and another individual, Dennis Jenkins.) Respondent and Pinckard met and became friends when Pinckard was represented by a law firm where respondent was employed as an attorney. Khalifa was a business partner, friend, and client of respondent. Respondent performed various legal services for Khalifa both before and after the transactions at issue.\nWe summarize the evidence adduced at the hearing as it relates to each instance of misconduct.\nConflict of Interest; Neglect of a Legal Matter\nIn the fall of 1980, Pinckard approached respondent in an effort to obtain financing for repairs to a building Pinckard owned in the Hyde Park area of Chicago. In a series of conversations, respondent and Khalifa discussed the possibility'of Khalifa\u2019s loaning $18,000 to Pinckard so he could undertake to repair his building. Eventually, Khalifa agreed to lend $18,000 to Pinckard. Khalifa would receive 20% interest on the loan, or $4,000 if the property were sold within six months. Khalifa was also to have a security interest in the property.\nRespondent, Pinckard and Khalifa met on October 15, 1980, in respondent\u2019s office to consummate the loan transaction. Khalifa produced a cashier\u2019s check payable to himself in the amount of $18,000. Respondent affixed on the check a restrictive endorsement that read as follows: \u201cpay to the order of Brian J. Demuth escrow account.\u201d According to respondent, this was done at Pinckard\u2019s request because Pinckard did not have a bank account and had no convenient means of negotiating the check. Khalifa endorsed the check at respondent\u2019s request and then returned the check to respondent. Pinckard testified that he did not see or receive the check. At the meeting, Pinckard executed a promissory note. Respondent deposited the cashier\u2019s check into his escrow account on or about October 15.\nOn October 15, 1980, respondent told Khalifa that respondent would prepare and file the security documents on Pinckard\u2019s property to secure Khalifa\u2019s loan. Respondent drafted mortgage documents and had them executed by Pinckard and Khalifa on October 15, 1980. However, these and other documents necessary to create a security interest for Khalifa were never filed.\nAlso on October 15, 1980, Khalifa asked respondent what respondent was getting out of the loan transaction; respondent replied that he would receive a few hundred dollars from Pinckard. Ultimately, Pinckard received from respondent $16,000 in a series of payments as proceeds of the loan. Pinckard testified that respondent charged him $2,000 as a finder\u2019s fee. He also testified that any funds he received from respondent were proceeds of the loan from Khalifa and that he never received a personal loan from respondent. Respondent concedes he retained $2,000. He maintains, however, that he only received a few hundred dollars for his work on the loan transaction. During oral argument before this court, his counsel asserted that the balance of the $2,000 was money respondent was entitled to in repayment of loans he had made to Pinckard.\nKhalifa and Pinckard each testified that respondent was acting as his attorney regarding the loan transaction.\nIn 1982, respondent discovered that the documents necessary to perfect Khalifa\u2019s security interest had never been filed; he promptly informed Khalifa. Thereafter, apparently in an attempt to remedy this situation, respondent suggested a transaction between Pinckard and Dennis Jenkins. Jenkins was a contractor who had an interest in the property, and was a client of respondent. Khalifa consented to respondent\u2019s suggestion. Respondent prepared an agreement which was executed by Pinckard and Jenkins. The property was deeded out of the land trust and into Jenkins\u2019 name, and Jenkins applied for a $70,000 loan. The money was to be applied to real estate taxes on the property and to repay the Khalifa loan. The loan was made and the real estate taxes were paid, but for reasons that are unclear, Khalifa did not receive any of the proceeds.\nPinckard never repaid the Khalifa loan. In 1985, Khalifa obtained a judgment against Pinckard, but has been unable to collect.\nConversion\nIt is undisputed that Pinckard did not receive the loan proceeds in a lump sum. On October 15, 1980, Pinckard received $2,000 from respondent. Pinckard testified that he received funds from respondent from time to time from October 1980 through June or July 1981, and that he never received more than $1,000 at a time after December 1980. Pinckard also testified that on two occasions, in October and November 1980, when Pinckard asked respondent for funds, respondent told him the funds had not yet cleared. On one of these occasions, Pinckard asked respondent why he was receiving the money in \u201cdribbles and drabbles,\u201d and respondent replied that he had set up the loan and Pinckard just had to go along with the way the money was issued to him. As we explain more fully below, respondent contends that Pinckard\u2019s testimony on these matters is not credible.\nBetween October 21 or 22, 1980, and November 13, 1980, respondent withdrew $15,150 from the escrow account in the form of cash withdrawals or checks made payable to himself or cash. Between November 13 and November 25, 1980, the balance in the escrow account was 11 cents.\nProhibited Business Transactions with a Client\nIn 1980, respondent borrowed a total of $11,600 from Khalifa on two separate occasions. On neither occasion did respondent advise Khalifa to consult another attorney. He did not discuss terms of the loans, provide immediate security for them, or disclose his own financial condition. Evidence was introduced tending to show that respondent was in financial difficulty at the time.\nKhalifa eventually filed a lawsuit against respondent, in part to collect repayment of these loans. Respondent has made restitution to Khalifa.\nDISCUSSION\nThe principles governing our review of the Board\u2019s report and recommendation are well established. The Administrator bears the burden of proving by clear and convincing evidence that respondent engaged in the misconduct with which he is charged. (107 Ill. 2d R. 753(c)(6).) The findings of fact made by the Hearing Board are entitled to virtually the same weight as the findings of any initial trier of fact. (E.g., In re Anglin (1988), 122 Ill. 2d 531, 538 (and cases cited therein).) Deference is accorded to findings of fact, for the Hearing Board is able to observe the demeanor of witnesses, judge their credibility and evaluate conflicting testimony. (In re Anglin (1988), 122 Ill. 2d 531, 538.) We turn now to an examination of each instance of misconduct.\nRespondent concedes that he is subject to discipline for neglecting to ensure that the documents necessary to perfect Khalifa\u2019s security interest were filed. Therefore further discussion of this charge is unnecessary.\nRespondent denies that he represented conflicting interests in connection with the loan transaction. Rule 5\u2014 105 of the Code (107 Ill. 2d R. 5 \u2014 105) provides:\n\u201c(a) A lawyer shall decline proffered employment if the exercise of his independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, except to the extent permitted under Rule 5 \u2014 105(c).\n***\n(c) In the situations covered by Rules 5 \u2014 105(a) and (b), a lawyer may represent multiple clients if it is obvious that he can adequately represent the interest of each and if each consents to the representation after full disclosure of the possible effect of such representation on the exercise of his independent professional judgment on behalf of each.\u201d\nRespondent contends that there was no conflict of interest for the following reasons. The object of all parties was to sell the Hyde Park property and respondent acted at all times in furtherance of this objective; he had no direct interest in the transaction and never preferred his interests over those of the parties to the transaction; and he never preferred the interest of one party over the other. In addition, at oral argument before this court, respondent (through his attorney) took the position that neither Khalifa nor Pinckard was respondent\u2019s client in the loan transaction; rather, respondent was acting merely as a businessman. Respondent\u2019s contentions lack merit.\nThe record supports the Hearing Board\u2019s finding that both Pinckard and Khalifa reasonably believed respondent was acting on behalf of each as his own attorney. It is obvious that a lender and borrower have conflicting interests; respondent\u2019s contention that all parties shared a common interest is simply erroneous. The record supports the Board\u2019s conclusion that respondent did not make full disclosure to either client, advise either of the potential conflict, or advise either client he was free to seek independent counsel. The fact that both clients were present at the October 15, 1980, meeting certainly does not satisfy respondent\u2019s obligations under Rule 5\u2014 105 to make full disclosure and obtain consent.\nIn addition, the Hearing Board found that respondent charged Pinckard $2,000 as a finder\u2019s fee (which respondent took out of the $18,000 loan) and that initially respondent did not inform Khalifa. The only evidence to the contrary is respondent\u2019s own assertion and Khalifa\u2019s testimony that respondent told him respondent would receive a few hundred dollars. The Board\u2019s finding is amply supported by Pinckard\u2019s testimony that he paid $2,000, and that he never received loans from respondent.\nFinally, we address respondent\u2019s contention that he did not violate Rule 5 \u2014 105 because he did not prefer the interests of one client over another. We rejected a similar contention in In re Rosin (1987), 118 Ill. 2d 365, where we addressed Rule 5 \u2014 101(a) of the Code (107 Ill. 2d R. 5 \u2014 101(a)). That rule prohibits a lawyer from accepting employment, unless the client has consented after full disclosure, if the exercise of the lawyer\u2019s professional judgment \u201cwill be or reasonably may be affected by\u201d his own interests. We pointed out in Rosin that Rule 5 \u2014 101(a) \u201cdoes not require a showing that the respondent\u2019s professional judgment was actually compromised by a conflict of interest.\u201d (Emphasis in original.) (Rosin, 118 Ill. 2d at 381.) The same is true of Rule 5 \u2014 105; that rule applies as long as the lawyer\u2019s independent professional judgment \u201cwill be or is likely to be adversely affected\u201d by his representation of multiple clients. (Emphasis added.) (107 Ill. 2d Rules 5 \u2014 105(a), (b); see Rosin, 118 Ill. 2d at 381.) Moreover, we cannot say with certainty that respondent\u2019s professional judgment was not adversely affected, in light of the manner in which respondent disbursed the funds to Pinckard from the escrow account (in \u201cdribbles and drabbles,\u201d in Pinckard\u2019s words), and respondent\u2019s failure to perfect Khalifa\u2019s security interest.\nIn sum, we find that the Administrator proved by clear and convincing evidence that in representing both Pinckard and Khalifa in the loan transaction, respondent violated Rule 5 \u2014 105.\nThe record also supports the Board\u2019s conclusion that respondent violated Rule 5 \u2014 105 of the Code regarding the Pinckard-Jenkins transaction. He arranged for the Hyde Park property to be deeded out of the land trust for the benefit of one client, Jenkins, when he knew that another client, Khalifa, was owed an obligation that was supposed to have been secured by the property. Although Khalifa agreed to the transaction, this consent was not given after full disclosure by respondent. Respondent failed to advise his clients of the conflict or that they had a right to retain independent counsel. Thus the requirements of Rule 5 \u2014 105 were not met.\nWe next address the conversion charge. Respondent contends that the record does not support the Board\u2019s finding that he converted funds. His position is that Pinckard received all the money to which he was entitled prior to the date the escrow account fell to 11 cents. He contends that Pinckard\u2019s testimony to the contrary lacks credibility, and in support points to an affidavit signed by Pinckard in 1984 in which he states he received all the loan proceeds \u201cas he [Pinckard] directed.\u201d Further, respondent maintains in this court that it may be inferred that the money withdrawn by respondent from the escrow account in October and November 1980 was given to Pinckard. (Neither respondent nor Pinckard kept any records reflecting the dates on which the money was disbursed to Pinckard.)\nThe inference which respondent urges us to draw is unsupported by anything in the record, other than respondent\u2019s answer to the complaint in which he denied converting funds. As we have said, credibility determinations are for the Hearing Board to make and are entitled to a good deal of deference. The Hearing Board was entitled to believe Pinckard\u2019s testimony that he continued to receive funds from respondent for several months after the balance in the escrow account fell to 11 cents. We accept the Hearing Board\u2019s finding on this disputed question of fact.\nPinckard eventually received all the money to which he was entitled. Nevertheless, when an account balance falls below the amount owed to a client, a conversion has occurred. (In re Holz (1988), 125 Ill. 2d 546, 555-56 (and cases cited therein); In re Grant (1982), 89 Ill. 2d 247, 251.) The Hearing Board\u2019s finding of conversion is supported by clear and convincing evidence.\nWe next address the Board\u2019s conclusion that respondent violated Rule 5 \u2014 104(a) of the Code (107 Ill. 2d R. 5 \u2014 104(a)). Rule 5 \u2014 104(a) provides as follows:\n\u201cA lawyer shall not enter into a business transaction with a client if they have conflicting interests therein and if the client expects the lawyer to exercise his professional judgment therein for the protection of the client, unless the client has consented after full disclosure.\u201d\nThe Hearing Board found that respondent violated this rule by obtaining loans from his client Khalifa without obtaining his client\u2019s consent after full disclosure. (See In re Goldstein (1984), 103 Ill. 2d 123 (Rule 5 \u2014 104 violated where attorney obtained loans from four clients for his personal use, without disclosing his financial situation or advising them to seek other counsel; attorney suspended for one year).) The fact that Khalifa was also respondent\u2019s friend and business partner does not alter respondent\u2019s obligations under the rule. We find that the Board\u2019s conclusion that respondent entered into a prohibited business transaction with a client is supported by clear and convincing evidence.\nFinally, the record supports the Board\u2019s conclusion that the evidence clearly and convincingly reflects that respondent put his interests above those of his clients.\nWe turn now to the appropriate sanction. The decision of what sanction is appropriate in a disciplinary proceeding rests with this court. (In re Harris (1982), 93 Ill. 2d 285, 296.) This determination is to be made in light of the purposes of our disciplinary process, which are to maintain the integrity of the legal profession, protect the administration of justice from reproach, and safeguard the public. In re Himmel (1988), 125 Ill. 2d 531, 544.\nThe Administrator contends that respondent\u2019s failure to admit he engaged in misconduct (other than neglect of a legal matter) and his consequent lack of contrition demonstrate that he does not understand the ethical obligations by which an attorney must be guided. We tend to agree. The Code of Professional Responsibility is not precatory; its rules are mandatory rules of conduct. Attorneys who fail to understand them or follow them do so at their peril. (See In re Holz (1988), 125 Ill. 2d 546, 560, citing In re Cheronis (1986), 114 Ill. 2d 527, 535.) An attorney may not unilaterally decide that the rules are inapplicable because, for example, the parties he is dealing with are also friends and business partners. These concerns weigh in favor of a lengthy suspension. (We note that we generally reserve the sanction of suspension until further order of this court for those cases where the disciplined attorney is emotionally unstable. In re Grant (1982), 89 Ill. 2d 247, 255.)\nIn addition, one client, Khalifa, suffered actual loss and was put to the expense and inconvenience of bringing suit against respondent to recover this loss. As for Pinckard, although he eventually received all the money to which he was entitled, he was exposed to a risk of loss when respondent withdrew funds from the escrow account for purposes other than disbursing them to his client. See In re Bizar (1983), 97 Ill. 2d 127, 132 (attorney suspended for one year for similar misconduct; rejecting contention that only censure was warranted because clients received all funds to which they were entitled); see also In re Saladino (1978), 71 Ill. 2d 263, 276.\nOn the other hand, some mitigating factors are present. The misconduct occurred eight years ago when respondent had been in practice for three years, and he has not been charged with any other misconduct in his 11-year career. A character witness for respondent testified to respondent\u2019s good reputation in the community for honesty and integrity. Respondent is active in community affairs and various youth groups. He has made restitution to Khalifa, although this was not done until after Khalifa filed suit. (See In re Williams (1986), 111 Ill. 2d 105, 117 (mitigating factors considered by this court include length of time in practice, previous misconduct, whether and when restitution is made if it is owing, community service, and testimony of character witnesses, quoting In re Lenz (1985), 108 Ill. 2d 445, 453-54).) Although we have considered serious personal problems to be a mitigating factor (e.g., In re Masters (1982), 91 Ill. 2d 413, 428 (illness and death of respondent\u2019s wife)), we reject respondent\u2019s contention that his status as a single person and his self-described unstable social life at the time constitute mitigating factors.\nWe have stated on numerous occasions that we endeavor to achieve uniformity in imposing discipline, but that we also consider each individual case on its own merits. (E.g., In re Lenz (1985), 108 Ill. 2d 445, 451.) Respondent\u2019s misconduct is serious, and it appears he still does not fully understand his ethical obligations. Some mitigating factors are present, notably his otherwise unblemished record and the fact that the misconduct occurred eight years ago. We conclude that the purposes of our disciplinary process will be adequately served by a lesser sanction than that recommended by the Review Board. After reviewing decisions of this court involving similar misconduct and weighing the mitigating and aggravating factors, we judge that an appropriate sanction is the suspension of respondent from the practice of law for a period of one year.\nAccordingly, it is ordered that respondent be suspended from the practice of law for one year.\nRespondent suspended.", "type": "majority", "author": "JUSTICE STAMOS" } ], "attorneys": [ "Scott Renfroe, of Chicago, for the Administrator of the Attorney Registration and Disciplinary Commission.", "James M. D\u2019Amico, of LaGrange, for respondent." ], "corrections": "", "head_matter": "(No. 67039.\nIn re BRIAN J. DEMUTH, Attorney, Respondent.\nOpinion filed December 15, 1988.\nScott Renfroe, of Chicago, for the Administrator of the Attorney Registration and Disciplinary Commission.\nJames M. D\u2019Amico, of LaGrange, for respondent." }, "file_name": "0001-01", "first_page_order": 11, "last_page_order": 25 }