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In re Greenberg

Decided: March 21, 1956.

IN THE MATTER OF WILLIAM GREENBERG, AN ATTORNEY-AT-LAW


On order to show cause why the respondent should not be disciplined.

For suspension for one year -- Justices Heher, Wachenfeld, Burling, Jacobs and Brennan. For suspension for two years -- Chief Justice Vanderbilt. The opinion of the court was delivered by Jacobs, J.

Jacobs

[21 NJ Page 214] The respondent William Greenberg, 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 was duly heard.

In May 1954 Richard S. Warren, a long distance truck driver, and Harry English, a production tester for Air Associates, wanted to purchase a truck and enter into a trucking business venture. They had no money and were apparently unable to borrow from a bank or other reputable lending institution. They answered a newspaper advertisement which led them to Hyman Greenstein, a retired businessman of Englewood. Mr. Greenstein testified that Messrs. Warren and English, together with Mrs. Ruth English, the mother of Harry English, visited him during May 1954, asked for a loan of $2,500, and Mrs. English stated she could offer, as security, certain marketable stocks plus a third mortgage on her home. Mr. Greenstein testified further that he told them that he would have to charge a bonus; that he could not do that unless they had a corporation to which he could make the loan; and that he recommended the respondent, who had acted as his attorney in previous matters, for the legal work incident to the formation of the corporation and the consummation of the loan. Mary E. Cesareo, the respondent's secretary, testified that on May 24, 1954 Messrs. Warren and English, Mrs. English and Mr. Warren's wife, came to the respondent's office, together with Mr. Greenstein; that she overheard Mr. Greenstein and Mrs. English discussing "the corporation that they were going to have"; and that Mrs. English "was thanking Mr. Greenstein for suggesting they make the corporation and Mr. Greenstein replied to her since they were going to have the corporation he thought it best she become an officer."

The respondent testified that when he returned to his office from lunch on May 24, 1954 he conferred with Messrs. Warren and English, Mrs. English, Mrs. Warren and Mr. Greenstein; that Mr. Greenstein explained that he intended to make a loan to "these people" and that he suggested "they have a corporation and they were agreeable to the same." Apparently the loan was then to be $2,900 plus a bonus of approximately $600, with Mrs. English's stocks and third mortgage as security. The respondent

checked the stocks and found them to have a marketable value of $2,000. He told Mrs. English that his legal fees would approximate $600 and he gave her the following "breakdown" as he expressed it: "I told her the corporation fee would be $250; that the deed from English to the corporation would be $25 and the deed from the corporation to English was to be $25 and there were two deeds to record -- $11.30; that the search on the property would cost $200 and the agreement with Mrs. English for the collateral would be $35 and that they would have to pay the transfer of the stock."

Subsequent to the conference of May 24, 1954 the amount of the loan from Mr. Greenstein (or his nominee) was increased to $3,500 plus a bonus of $1,000 and the loan was actually consummated on June 7, 1954. The corporation was formed, title to the English home was conveyed to the corporation which then executed a third mortgage to Mr. Greenstein, and the property was then reconveyed to Mr. and Mrs. English. Mrs. English's stocks were turned over to Mr. Greenstein, as security, as was the corporate stock of the newly formed corporation. The respondent's actual charges for legal services and related disbursements aggregated $647.05 and the net amount which the borrower received may therefore be said to have been $2,852.95; on the other hand the borrower's obligation, on its face, was for $4,500 with legal interest, secured by the corporate stock, a third mortgage on the English home, and the marketable stocks of Mrs. English which were then worth $2,000 but have since increased in value.

It is undisputed that throughout the transaction the borrowing interests received no independent legal advice. Mrs. English testified she assumed that the respondent "was working for the good of everybody." Mr. Warren testified that the respondent had said that "as long as he was handling the case and handling Mr. Greenstein's interest" that he might as well handle their interest and "handle everything to do with the trucking business." Mr. Harry English testified that it was understood that the respondent would

represent the newly formed corporation. The respondent testified that he represented the lender and not the borrower; he acknowledged that he did not at any time suggest to the borrowing interests that independent legal advice be obtained. At one point he testified that he did not think Mrs. English, who had been a housekeeper and whose husband was a maintenance man, "knew what it was all about" but he did not advise her as to what she was getting into because he "had no obligation to explain it to her." In response to an inquiry as to why "Mrs. English would be thanking Mr. Greenstein for suggesting the corporation" the respondent replied that Mr. Greenstein was a pretty good salesman and had probably convinced her that "it was the best thing in the world for her." The respondent admitted that he never explained anything to Mrs. English about the legality or illegality of bonus payments and did not suggest to her that she could perhaps obtain a direct loan upon the security of her marketable stocks valued at $2,000.

The respondent expressly denied that he ever advised Messrs. Warren and English that they would have to form a corporation; he stated that Mr. Greenstein had told him that he agreed to make the loan "providing a corporation was created." Mr. Warren testified that both the respondent and Mr. Greenstein told him that incorporating was the only way there could be a bonus legally. Mr. English did not recall whether it was Mr. Greenstein or the respondent who said they "would have to be incorporated." Mrs. English testified that although she was uncertain about the matter she did understand the respondent to say that "it would have to be incorporated" and that Mr. Greenstein had said "I want this done to protect you." The respondent denied that this latter remark was made in his presence. Mr. Greenstein testified that long before he ever met the respondent he knew that a corporation could not plead the ...


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