For reprimand -- Chief Justice Weintraub, Justices Jacobs, Proctor, Hall, Mountain and Sullivan and Judge Conford. Opposed -- None.
The Essex County Ethics Committee filed its presentment charging respondent, Mordecai Sarbone, with misconduct as an attorney in three separate matters. The proceedings before the Committee were initiated by a written complaint filed by David A. Berney, a former client of respondent's. We consider the matters separately.
The 1962 mortgage transaction.
In early 1960 respondent and others organized a mortgage company and obtained Federal Housing Administration certification as an approved lending institution. The company operated as a mortgage banker originating loans, closing loans, selling loan packages to permanent lenders and servicing mortgages. Respondent, who became president of and counsel to the company, had invested substantial funds of his own in the venture. Berney, who was then a client and personal friend of respondent's, became a stockholder in the company by purchasing 20 shares of 15% cumulative preferred stock at a cost of $10,000.
In 1962 the company found itself in need of improving its asset picture in order to maintain certification with F.H.A. To that end respondent persuaded Berney and his wife to execute a second mortgage on an apartment building owned by them which was to be used as an ostensible company asset. The mortgage, dated March 27, 1962, was in the amount of $68,000 and named respondent as the mortgagee.*fn* The mortgage was assigned to the company
by respondent and appeared as an asset on its books. Some twenty-one months later the mortgage, which had been recorded, was returned to the Berney's and cancelled of record. Admittedly they suffered no financial loss in the transaction.
The Ethics Committee found that respondent had procured the execution of a false instrument calculated to deceive, and had exposed his clients (the Berneys) to a substantial risk and potential liability.
It is difficult to reconstruct the full picture of the transaction after the lapse of so many years. Company records are not available (the company failed and is now defunct) and pertinent documents cannot now be located. The inherent frailty of memory of events of ten years ago is also a factor, particularly where credibility is involved. We are not so much concerned with the exposure of the Berneys to possible liability. They seem to have been fully aware of what they were doing in protecting their original investment by bolstering the company's financial picture.
The real problem is whether or not it was an attempted fraud on F.H.A. However, the record does not indicate whether the mortgage was represented as accommodation security and whether respondent, had he been called upon, could have substituted other acceptable security.
The fact that the transaction occurred more than ten years ago is no defense. There is no statute of limitation on an ethics violation. However, the time interval has clouded the picture and to some extent prejudiced respondent's ability to defend against the charge. We accord him the benefit of a doubt.
Respondent's borrowings from Berney.
Respondent admittedly became indebted to Berney in 1962 and 1963 for substantial sums of money. The indebtedness was recast on several occasions, but respondent was never able to make good on the terms of payment. Finally ...