For reprimand -- Chief Justice Hughes and Justices Jacobs, Hall, Mountain, Sullivan, Pashman and Clifford. Opposed -- None. Pashman, J. (concurring).
The Bergen County Ethics Committee filed a presentment with this Court against respondent, Guy J. Lanza, who has been a practicing member of the bar of this State since 1954.
The Committee specifically found that respondent's conduct violated DR 5-105. This Disciplinary Rule forbids an attorney to represent adverse interests, except under certain very carefully circumscribed conditions.*fn1
In April or May of 1971, Elizabeth F. Greene consulted respondent with respect to the sale of her residence property in Palisades Park, New Jersey. Mr. Lanza agreed to act for her. In due course a contract, apparently prepared by a broker, was signed by Mrs. Greene as seller as well as by the prospective purchasers, James and Joan Connolly. The execution and delivery of the contract took place in Mr. Lanza's office, although he seems to have played little or no part in the negotiation of its terms. By this time he had agreed with the Connollys that he would represent them, as well as Mrs. Greene, in completing the transaction. The testimony is conflicting as to whether or not Mrs. Greene had been told of this dual representation at the time she signed the contract. Mr. Lanza says that she had been told, but according to her recollection she only learned of this at a later date from Mrs. Connolly. In any event it is quite clear that respondent agreed to act for the purchasers before discussing the question of such additional representation with Mrs. Greene.
The contract as originally drawn provided for a closing date in late July, 1971. At Mrs. Greene's request this date was postponed to September 1. A short time later, circumstances having again changed, Mrs. Greene found that she would now prefer the original date. This proved satisfactory to the purchasers but Mr. Connolly told Mrs. Greene that
at this earlier date he would not have in hand funds sufficient to make up the full purchase price of $36,000. Of this sum he would lack $1,000. He suggested, however, that the parties might close title upon the earlier date if Mrs. Greene would accept, as part of the purchase price, a check for $1,000 postdated approximately 30 days. Mrs. Greene was personally agreeable to this. She consulted respondent who advised her that he saw no reason why she should not follow this course.
The closing accordingly took place late in July and in accordance with the foregoing arrangement, Mrs. Greene received, as part of the purchase price, Mr. Connolly's check in the sum of $1,000 dated August 31, 1971. Shortly after this latter date she deposited the check for collection and it was returned because of insufficient funds. When questioned, Mr. Connolly said that after he and his wife had taken possession of the property they discovered a serious water condition in the cellar. He added that Mrs. Greene had made an explicit representation that the cellar was at all times dry. For this reason he refused to make good the check, saying that it would cost him $1,000 to rectify the condition in the cellar. Mrs. Greene denied that she had ever made any representation whatsoever. She immediately got in touch with respondent who did nothing effective on her behalf. She then retained other counsel and has subsequently initiated legal proceedings against the Connollys.
We find respondent's conduct to have been unprofessional in two respects. In the first place, the way in which he undertook the dual representation failed to meet the standards imposed upon an attorney who elects to follow such a course. In the second place, after the latent conflict of interests of the two clients had become acute, he nevertheless continued to represent both parties. At that point, rather than going forward with the matter as he did, he should have withdrawn altogether.
Mr. Lanza first undertook to act for the seller, Mrs. Greene. This immediately placed upon him an obligation to
represent her with undivided fidelity. Despite this obligation, he later agreed, without prior consultation with Mrs. Greene, to represent Mr. and Mrs. Connolly, whose interest in the matter was of course potentially adverse to that of his client. He should not have undertaken to represent the purchasers until he had initially conferred with Mrs. Greene. He should have first explained to her all the facts and indicated in specific detail all the areas of potential conflict that foreseeably might arise. He should also have made her aware that if indeed any of these contingencies should thereafter eventuate and not prove susceptible of ready solution in a manner fair and agreeable to all concerned, it would then become his professional duty immediately to cease acting for all parties. Only after such a conference with his client, and following her informed consent, would he have been at liberty to consider representing the purchasers. They, too, were entitled to the same explanation as is set forth above, as well as being told of respondent's existing attorney-client relationship with the seller.
The second instance of misconduct arose after respondent learned that the purchasers would not be able to pay the full purchase price in cash at the time of closing title. At that point adequate representation of the seller required that her attorney first strongly insist on her behalf that cash be forthcoming. Failing this, and if the seller persisted in her wish to close upon the earlier date, her attorney should have vigorously urged the execution and delivery to her of a mortgage from the purchasers in the amount of $1,000, or of other adequate security, in order to protect her interest pending receipt of the full cash payment. We think it fair to assume that had respondent not found himself in a position of conflicting loyalties, his representation of the seller would have taken some such ...