A lawyer was hired to defend a mechanic’s lien action. Typically, a mechanic’s lien is filed by a contractor who did work on a construction project. The lien is designed to force the owner of the property to pay the outstanding invoice. Lien law is tricky and complex.
Here the respondent was retained by two homeowners to defend a mechanic’s lien lawsuit. Instead of defending the lien, the respondent created two spurious entities to apparently convince the court that the lien was invalid. The Hearing Board found that this conduct involved dishonesty and false statements to a tribunal and recommended a 30-day suspension. The Review Board increased the suspension to 60 days.
The Review Board recites the facts in this manner:
In July 2011, Respondent began representing David and Jody Bilstrom in a mechanic’s-lien action that was filed against them in 2006 by Artisan Design Build, LLC, a Wisconsin limited liability company. Respondent took over the case after the Bilstroms’ prior counsel withdrew. Respondent believed that he would not have difficulty resolving the matter, because it was his opinion that the mechanic’s lien was invalid.
In the initial complaint, as well as in an amended complaint filed in 2008, the plaintiff was incorrectly named “Artisan Design Build, Inc.” Soon after filing his appearance in the matter, Respondent prepared articles of incorporation for an Illinois entity named “Artisan Design Build, Inc.” – the exact name of the plaintiff as captioned in the complaint and amended complaint. Respondent designated his employee, Steven Schwartz, as the registered agent for Artisan Design Build, Inc. He listed the company’s registered business address as 2101 St. John’s Avenue in Highland Park, Illinois, which was Mr. Schwartz’s home address at the time.
At Respondent’s direction, Mr. Schwartz signed the Articles of Incorporation and filed them with the Illinois Secretary of State. Respondent paid the filing fee. Respondent admitted in his answer to the disciplinary complaint against him that Artisan Design Build, Inc. never undertook any work or transacted any business in Illinois or anywhere else.
On or about July 26, 2011, Respondent drafted a letter to himself purportedly from Mr. Schwartz as the sole shareholder of Artisan Design Build, Inc. Respondent directed his secretary to type the letter and Mr. Schwartz to sign it. The letter stated, among other things, that Mr. Schwartz knew nothing about the lawsuit involving a corporation with the name Artisan Design Build, Inc.; was concerned that the pending lawsuit could have a negative impact on his corporation; and wanted the lawsuit terminated. Respondent admitted at his disciplinary hearing that these statements purportedly by Mr. Schwartz were false, in that Mr. Schwartz knew all about the lawsuit because he was working for Respondent, and was not concerned about the effect of the lawsuit on his corporation.
About nine days after drafting the letter, Respondent drafted and filed a motion to dismiss the complaint against the Bilstroms. In the motion, he argued that the only corporation with the name “Artisan Design Build, Inc.” that has ever been qualified to do business in Illinois was the corporation for which articles of incorporation were filed in July 2011. He attached the July 26 letter signed by Mr. Schwartz and claimed that it was from the individual who filed those articles of incorporation and who is its sole shareholder. He further argued that the plaintiff in the lawsuit had not obtained authority to conduct business in Illinois, never existed in Illinois, and had not paid a franchise tax or license fee, and that its authority to conduct business in Illinois had been revoked, so that it could not maintain a civil action in an Illinois court.
At his disciplinary hearing, Respondent admitted that he did not inform the court that Mr. Schwartz was his employee and had formed the corporation at Respondent’s direction.
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He testified that he believed Artisan Design Build, LLC’s original lien was invalid, and that the company was being sneaky in creating a lien under a different name and foreclosing on that lien, and he wanted the court to understand that that was something that should not be done. He acknowledged that he should have made his points in a straightforward manner rather than by drafting and attaching the letter. He testified that his intent in preparing and attaching the letter was to make sure that Artisan Design Build, LLC could not proceed under the name Artisan Design Build, Inc., and that his goal was to have the plaintiff proceed as Artisan Design Build, LLC. He denied that he was trying to deceive anyone with the letter.
On November 29, 2011, the court granted Artisan Design Build, LLC leave to file a second amended complaint to correct its captioned name, and denied as moot Respondent’s motion to dismiss.
In August 2012, while the mechanic’s-lien lawsuit was still pending, the Bilstroms sought to get a mortgage from a bank. The bank was concerned about the litigation and wanted to make sure that the mechanic’s lien did not exist. Respondent provided a title report that did not show the lien and offered to provide his professional opinion that the lien was invalid, but that was not sufficient to assuage the bank’s concern about the litigation. According to Respondent, the bank wanted “external documentation.”
Respondent thus drafted a “Release of Mechanic’s Lien” using the same lien number as the one that Artisan Design Build, LLC had recorded in 2006. The purported release listed the lienholder’s name as “Artisan Design Build, Inc.” and stated that Artisan Design Build, Inc. released the claim for lien against the Bilstroms and authorized the DuPage County Recorder of Deeds to enter satisfaction and release of the lien.
Respondent directed his employee Mr. Schwartz, as registered agent for Artisan Design Build, Inc., to sign the release, and directed his secretary to notarize it. Respondent or
someone acting at his direction presented the purported release to the DuPage County Recorder of Deeds and caused it to be recorded. Respondent paid the filing fee.
At his hearing, Respondent admitted he knew that Artisan Design Build, Inc. did not file a lien; that, at no time on or after the date the lien was filed, had the mechanic’s lien been satisfied or released; that, at no time did he have the authority of Artisan Design Build, LLC to release the mechanic’s lien; and that Mr. Schwartz did not have authority to release the lien.
A few weeks after filing the purported release, Respondent realized the release referred to “Artisan Design Build, Inc.” instead of “Artisan Design Build, LLC,” so he drafted a second release for the same lien number, but under the name of “Artisan Design Build, LLC.” Respondent directed Mr. Schwartz to sign, and his secretary to notarize, the second release. He presented the second release to the DuPage County Recorder of Deeds and caused the release to be recorded. He paid the filing fee.
Respondent admitted that Artisan Design Build, LLC did not satisfy or release the mechanic’s lien; that he knew that Mr. Schwartz was not authorized to release the lien; that Artisan Design Build, LLC did not authorize him to release the lien; and that he had no rights in the Artisan Design Build, LLC name.
In September 2012, Respondent or someone acting at his direction filed an application to cancel the assumed corporate name of Artisan Design Build, Inc. At Respondent’s direction, Mr. Schwartz signed the application as the company’s president. On the same day, to comport with the information in the second purported release, Respondent drafted and caused to be filed with the Illinois Secretary of State articles of incorporation for an entity named “Artisan Design Build, LLC,” with the same registered business address as Artisan Design Build, Inc. – Mr. Schwartz’s home address. Respondent directed Mr. Schwartz to sign the articles of incorporation for Artisan Design Build, LLC as its manager. Respondent paid the filing fee.
Respondent admitted that Artisan Design Build, LLC, the Illinois company that he organized, never transacted business in Illinois, and that neither he nor Mr. Schwartz transacted business on behalf of Artisan Design Build, LLC in Illinois.
At his hearing, Respondent testified that he created the purported releases because the bank wanted outside documentation. He testified that he knew the liens “were gone” and “invalid to begin with.” He testified that he did not think he was doing anything wrong because he “was filing a release of something that didn’t exist,” so “wasn’t releasing anything.” He testified that he had planned to use the releases, but did not use them outside of recording them.
My opinion: given the amount of deceptive conduct involved here and the creation of fake documents purporting to release mechanic’s liens and the failure to express remorse, I’m surprised the suspension was for only 60 days. For anyone who is facing a harsh penalty, this case can be used as an example of why your client should not be suspended for more than 60 days.
Edward X. Clinton, Jr.
Legal Ethics Lawyer 