On order to show cause why the respondent should not be disciplined.
For suspension for three years -- Justices Heher, Oliphant, Wachenfeld, Burling and Jacobs. For disbarment -- Chief Justice Vanderbilt, and Justice Brennan. The opinion of the court was delivered by Jacobs, J.
The respondent Vincent F.X. Carlsen, an attorney-at-law, is charged with conduct violating the canons of professional ethics. Testimony was taken before the Bergen County Ethics and Grievance Committee and the respondent has been heard fully.
In January 1951 Mr. Doyle E. Bush visited Carlsen's law office. He had been a client for several years and his visit related to a legal matter which Carlsen was handling for him. While he was there Carlsen inquired whether he would be interested in a business proposition relating to the purchase of distillery property in Puerto Rico. Carlsen gave him a letter dated January 27, 1951 from David Lubben (another client of Carlsen) which described the property generally and stated that its seller was offering it for sale at the price of $75,000. Bush put the letter in his pocket and told Carlsen that he would read it and let him know what he thought about it. During a later visit he told Carlsen he was interested in the distillery matter and Carlsen
thereafter arranged a trip to Puerto Rico. He introduced Bush to Lubben and the three of them inspected the property and signed a written agreement (dated February 24, 1951) for its purchase; Bush testified that Lubben indicated to him that the seller's price was firm and that no reduction was obtainable. Under the terms of the agreement the Yabucoa Molasses Company, Inc. agreed to sell the property to Bush, Carlsen and Lubben, or a corporation to be formed by them, for $75,000, to be paid as follows: $7,500 deposit upon the signing of the agreement, $42,500 upon the delivery of title, and a first mortgage of $25,000 for the balance. Bush testified that in his discussions with Carlsen and Lubben it was understood that if he "put in $25,000, they would invest $12,500 each and I would be a half owner of the property and they 25 percent owner each"; they also talked of forming a Puerto Rico corporation and for his $25,000 Bush "would get 25,000 shares of $1.00 par value; Mr. Carlsen 12,500 shares for $12,500 and Mr. Lubben, 12,500 shares for $12,500." When the agreement was signed Bush delivered his check for $3,750 representing 50% of the deposit payment of $7,500; he testified that at that time "Mr. Carlsen told Mr. Lubben to pay his share and he would pay him back; and Mr. Lubben, I assume, had a check and handed it to either the closing attorney or the seller." In fact, Lubben did deliver a check for $3,750 purportedly representing the remaining 50% of the deposit then payable.
In March 1951 Carlsen, Lubben, Bush and Esteve, a Puerto Rican attorney, formed United Industries of Puerto Rico, Inc. to take title to the distillery property. The articles of incorporation set forth that the number of shares subscribed for and the amount of subscriptions paid in by the incorporators were as follows: Bush, 25,000 shares -- $25,000; Carlsen, 12,500 shares -- $12,500; Lubben, 12,500 shares -- $12,500; Esteve, 1 share -- $1. Bush suggested that the property should be paid for by the corporation but in a letter dated March 28, 1951 Carlsen advised that he thought "payment should be made by all of us as individuals and let
the corporation acquire it from us." In another letter dated March 28, 1951 Carlsen told Lubben that he did not want the corporation to make payment for the property, and that "payment should be made by the individuals named in the contract and the mortgage should be given by the corporation." On April 9, 1951 there was a closing pursuant to the agreement of sale. Carlsen did not attend but Bush, Lubben and Esteve were there as well as Nestor Rigual, president of the seller, Yabucoa Molasses Company, Inc. A deed was executed transferring title directly from the seller to United Industries. Bush delivered his check for $21,250 and, according to his testimony, "Mr. Lubben was supposed to have his and Mr. Carlsen's share, and he turned the check over, whatever it was, to either the closing attorney or the seller." In fact, Lubben did deliver his check for $21,250 purportedly representing 50% of the sum of $42,500 then payable under the agreement of sale. Bush testified that he at all times understood that Lubben and Carlsen were contributing $12,500 each to match his $25,000; that he would not have gone into the deal if he had known Carlsen was not actually putting up $12,500; and that he knew nothing about distilleries or Puerto Rican real estate values and "went along because these fellows were putting cash into it." Following the closing, Bush received a letter dated April 11, 1951 from Carlsen stating that he was "very happy" about the distillery deal; the same letter referred to unrelated legal matters then being handled by Carlsen for Bush.
Bush testified that when he originally decided to participate in the venture, Carlsen told him that he would readily obtain working capital of $25,000. Carlsen did arrange to have his client Maggiolo invest $12,500 for 12,500 shares of stock in United Industries; and under date of April 20, 1951 Carlsen wrote a letter to Bush enclosing check for $12,500 together with "corporate resolution and signature cards which are necessary in order to authorize you to open an account at the Chase National Bank." In this letter Carlsen stated that he had not encouraged the investment
of more than $12,500 because he did not believe it wise "to diminish our interests by the disposition of stock to others in return for investment"; he stated further that "the total amount now paid into the corporation" including the amount advanced by Maggiolo, "is now $62,500." In May 1951 Lubben sold his stock in United Industries to Bush in a transaction which involved a conveyance to Lubben of certain Maywood, New Jersey, property then owned by Bush. Carlsen represented Bush in this transaction and, subsequently, in other legal matters of minor nature. Carlsen never sought or received a legal fee in connection with any part of the Puerto Rican venture; he apparently considered himself as a co-principal with Bush and Lubben and the local legal matters were passed upon by the Puerto Rican attorney.
Things did not go well with the Puerto Rican venture and the distillery was never put into operation; it was unsuccessfully offered for sale. When the corporate funds were virtually depleted Bush, Carlsen and Maggiolo made contributions; Bush testified that these aggregated approximately $1,700 and were made proportionately in accordance with their then stockholdings in United Industries -- i.e., Bush -- 60%; Carlsen -- 20%; Maggiolo -- 20%. Foreclosure proceedings were instituted by the seller but they were apparently withdrawn when Carlsen arranged for payment sufficient to remove the default. In the meantime Bush apparently learned for the first time that Carlsen had never actually contributed his original $12,500 (or any portion thereof). Indeed, it now appears that neither Lubben nor ...