Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Chase

Decided: October 14, 1975.

IN THE MATTER OF DONALD C. CHASE, AN ATTORNEY AT LAW


For reprimand -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. Opposed -- None.

Per Curiam

The Somerset County Ethics Committee, after hearing, presents its complaint against respondent for violation of DR 5-105(C) in that he improperly represented two of his clients in a loan transaction between them, thereby placing himself in an unethical conflict of interests situation.

The testimony at the hearing justifies the following findings of fact. A Mrs. Audrey Warner, having won a New Jersey State Lottery in early 1973 entitling her to $50,000 per year for 20 years, went to respondent for advice as to investing the funds to be received. Respondent's firm had represented her and her husband in other matters. At first respondent explored the possibilities of creating a substantial capital fund by borrowing against the anticipated future income. Expecting success, respondent drew an irrevocable trust agreement calling for division of the trust estate into seven equal shares, income payable to the Warners and their five grandchildren, respectively, for stated periods of time. Respondent was made sole trustee and given plenary investment

powers. Although Mrs. Warner signed the agreement as "settlor", the trust was treated as "dead" after respondent determined that the capitalization plan was not feasible.

Nevertheless, Mrs. Warner turned over to respondent for investment 39,000 of the initial $50,000 installment of the lottery prize which she received in April 1973. She and her husband testified it was understood this was to be invested in a Holiday Inn then being constructed on Rt. 22. Respondent denied this, saying the investment was to be left to his sound discretion, the only understanding being that the investment should be "safe" and bring a "good return". This factual conflict need not be resolved, as the determination of this matter does not depend on it.

Respondent placed the funds in his attorney's trust account and on June 14, 1973 advanced the $39,000 as a loan to a trucking concern owned by a long-standing client of his, one F. C. Bruno. He received from Bruno a demand promissory note payable to the Warners calling for 9 I/4 percent interest. Although Bruno also executed a mortgage (behind two prior mortgages) on his home, the name of the mortgagee was never filled in and the instrument was not recorded. Nor was any search made on the property. No other security was exacted from the borrower at or subsequent to the delivery of the loaned funds. Bruno's net assets at the time, according to his accountant, were worth about $95,000.

When the Bruno loan was made the Warners were not informed as to the identity of the borrower or that he was a client of respondent. They apparently were informed only that they would receive payments of about $600 per month. They actually received $625.48 twice, once in August 1973, the other in September 1973. These payments, under the arrangement between Bruno and respondent, represented, as to the first payment, two months interest of $601.86 and $26.22 for principal, while the second payment constituted $300.42 for interest and $327.06 for principal. These checks were drawn on the respondent's trust account. Only the second bore a reference to "Bruno". The Warners complained

about the delay in the payments, and then, for the first time, in October 1973, respondent told them the loan was to his client Bruno. They promptly demanded the return of their money. Repayments of $7,000 and $5,000 were made before November 5, 1973. After their inability to get satisfaction from respondent for the balance due, the intercession of another attorney, and the filing of a complaint with the ethics committee, respondent ultimately (in February 1974) made good the whole principal balance together with interest at 9 I/4 percent. Respondent's delay in restoring the funds was partly attributable to his critical domestic difficulties at the time and partly to the need to find refinancing for the Bruno loan.

Notwithstanding respondent's efforts to justify his conduct in lending the money of one client to another without informing the former of the relationships and making the disclosure called for by DR 5-105(C),*fn1 those efforts must fail.

Respondent urges he was given carte blanche to make any safe investment he chose, and that he had every reason to believe that an unsecured loan to Bruno was safe, based on his knowledge of Bruno's reliability and financial standing. This misses the point of the disciplinary rule entirely, and it is surprising to us that any lawyer of experience would not so understand, having in mind ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.