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In re Pisula, 09 CH 13 (ARDC Hearing Board, May 16, 2011), M R 24722 (Ill S Ct, Sept. 26, 2011).Search the IARDC site for the Opinion.

Facts:Joseph Pisula is an Illinois attorney who from 1989 to 2009 was the president of an Illinois corporation, Integrity Title, Inc (Integrity). In 1999, Integrity entered into an agency agreement with Lawyers Title Insurance Corporation (Lawyers Title). The substance of the agreement was that Integrity would "quote, charge, and collect title insurance premiums on behalf of Lawyers Title." The agreement also stipulated that Integrity was to send a percentage of each premium collected to Lawyers Title.

The language of the agreement stated, "until remitted, [Lawyers Title's] portion of the charge shall be held in trust by [Integrity]." If the payment was not remitted when due, then interest would be owed on the payment until it was made.

From the time that Integrity and Lawyers Title entered into the agreement in 1999 through 2007, Integrity collected $190,115 in premiums. Pursuant to the agency agreement, Integrity owed Lawyers Title $81,745.60 of this amount. The agreement required Integrity to hold this amount in a separate account, designated specifically for the premium funds. However, Integrity never paid any of the money it owed to Lawyers Title. As a result, Integrity owed an additional $15,242.49 in interest to Lawyers Title.

Integrity's president, Pisula, admitted that he had not made any payments to Lawyers Title. He claimed that his business had "gotten very poor" and he used the money owed to Lawyers Title to cover Integrity's operating expenses. At no point in the agency relationship did Pisula use a separate account for the premium funds that were to be paid to Lawyers Title. He deposited all the money into Integrity's operating expense account and paid Integrity's expenses from the same account.

When it became clear that Integrity was not able to pay, Lawyers Title sued the company and won summary judgment against Integrity in 2008. In 2009, the Administrator of the Illinois Attorney Registration and Disciplinary Commission (ARDC) filed a complaint against Mr. Pisula. The complaint accused Pisula of conversion of third-party funds, breaching his fiduciary duty and failing to promptly deliver third-party funds.

Pisula testified that he did not breach his fiduciary duty because he felt that he did not have one with Lawyers Title. He claimed that his fiduciary duty was "mainly to the public." He did not consider the money that was owed to Lawyers Title to be money he was holding in trust. He said that he "treated policy fees like any other expense of doing business with Integrity" and felt that "Lawyers Title was just another creditor" and not a party to which he owed a fiduciary duty.

There was considerable conflicting testimony on whether Lawyers Title employees knew there was no separate account, whether, if they did know, they sanctioned Integrity's accounting practices, and whether auditors from Lawyers Title had checked for a separate account. Mr. Pisula argued that if Lawyers Title had such a strong policy on keeping separate accounts, then in its decade long agreement with Integrity, it should have verified whether Integrity was keeping segregated accounts. A former Lawyers Title agency auditor testified to shed some light on the discrepancies, stating that, while agency agreements like the one between Integrity and Lawyers Title often included requirements for separate accounts, these requirements were "never enforced," and that underwriters' primary concern was with being paid.

Holding:The Illinois Supreme Court suspended Mr. Pisula for nine months and ordered him to reimburse the Client Protection Program Trust Fund for any client protection payments arising from his conduct before the end of the period of suspension.

The Illinois Supreme Court's ruling was based on the ARDC Hearing Board's conclusions. The ARDC Hearing Board concluded that Mr. Pisula had converted funds that belonged to Lawyers Title, that he had breached his fiduciary duty to Lawyers Title, that he had violated Illinois Rule of Professional Conduct 1.15(b) requiring prompt delivery of funds to a third party, and that because of these actions he had violated Supreme Court Rule 770, which calls for the disciplining of attorneys who engage in unethical conduct.

In ARDC decisions, the Administrator must prove all allegations by clear and convincing evidence. The hearing board found that the Administrator had successfully proven all of the allegations of the complaint. The board found that Mr. Pisula had converted Lawyers Title funds because the agreement was "clear and unambiguous" that the funds should be held in trust. By using the funds to pay for his own business expenses without any authority to do so, Mr. Pisula was guilty of conversion.

The board also found that Mr. Pisula had breached his fiduciary duty to Lawyers Title. There was a principal/agent relationship between Integrity and Lawyers Title and this relationship imposed on Mr. Pisula a "fiduciary duty to exercise the highest degree of fidelity, loyalty and good faith in its dealings with Lawyers Title." By not keeping the funds in a separate account and by using them for the benefit of Integrity instead of paying them to Lawyers Title, Mr. Pisula breached his fiduciary duty.

Rule 1.15(b) of the Illinois Rules of Professional Conduct states that, unless an exception has been agreed to, "a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive." Integrity had not made any payments to Lawyers Title from January 1, 1999, to February 9, 2007. Integrity had also not paid any portion of the judgment against it that Lawyers Title won in court. The board found that Mr. Pisula's failure to promptly deliver these funds as president of Integrity was a violation of Rule 1.15(b).

The Hearing Board report did not make a finding whether under Illinois law the Rules of Professional Conduct apply to Mr. Pisula in his capacity as president of Integrity. Mr. Pisula maintained a law practice at the same time he was president of Integrity, so Integrity seemed to have been an ancillary business to Mr. Pisula's law practice. In the case of an ancillary business, there is no guidance about whether Rule 1.15 should be applied. The American Bar Association's Model Rules of Professional Conduct have a rule dealing with ancillary businesses, but Illinois has specifically chosen not to adopt this rule.

Mr. Pisula did not specifically challenge the board's application of Rule 1.15 to his actions, but he did argue generally that he should not be disciplined for his actions as president of Integrity. Mr. Pisula argued that he was "not acting as an attorney," and that therefore he should not be sanctioned. The ARDC disagreed. It quoted the Illinois Supreme Court stating, "It is not necessary that the acts for which an attorney is subject to discipline be performed in the discharge of professional duties. Misconduct sufficient to warrant suspension or disbarment may be shown by acts not occurring in the course of his professional duties but in a private or business capacity."In re Abbamonto, 19 Ill 2d 93, 166 NE 2d 62 (1960). Note, however, thatAbbamontowas decided before the Rules of Professional Conduct were adopted in Illinois.

The board cited a number of similar ARDC decisions as precedent for its recommendation.In re Wells, 92 CH 576, andIn re Loveless, 00 CH 65, both resulted in discipline for attorneys whose conduct related to their roles as title agents, not as attorneys.

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