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In re Makowski

Decided: May 24, 1977.

IN THE MATTER OF ALPHONSE MAKOWSKI, AN ATTORNEY-AT-LAW


For suspension for six months -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Clifford and Schreiber and Judge Conford. Opposed -- None.

Per Curiam

This disciplinary action was instituted when one of respondent's clients complained to the Somerset County Ethics Committee that respondent had appropriated to his own use money she had given to him to invest. The County Ethics Committee referred the matter to the Central Ethics Unit for investigation. An accountant employed by the latter to examine respondent's books reported irregularities in his "trust account" which led to the filing of an additional complaint against him by the Chief of the Central Ethics Unit. The two complaints were consolidated and a hearing held before the Somerset County Ethics Committee, which thereupon submitted a presentment to this Court.

I

The original complaint was brought by Mrs. Helen Banas. She and respondent were lifelong friends, and over the years he had done occasional legal work for her apparently without charge. In 1963 Mrs. Banas, a widow with money to invest, indicated to respondent that she would be interested in "some good first mortgages." For about four years thereafter, Mrs. Banas from time to time turned over funds to respondent which he then lent to other persons, at least some of whom were his clients, usually on the security of

mortgages given by the borrowers. Most of the loans have been fully repaid, with interest. At the time of the complaint, two loans remained at least partially unsatisfied, and one of the borrowers had left town and could not be traced. Respondent testified, however, that he had personally guaranteed every loan. A written agreement of guaranty dated January 3, 1968 supported this assertion.

In addition to investing her money in this way, respondent at various times borrowed a total of $23,000 of Mrs. Banas' funds on his own account. She testified that she never knew in advance to whom her funds were to be lent, but left such matters entirely in the hands of respondent, whom she regarded as the primary source for repayment of the loans. She was concerned only with earning an income from her investments. She learned the details of the loans only after they had been consummated but testified that she had no objection to this course of practice. It seems clear that she would not have instituted her complaint had it not been for the tardiness in making full repayment.

In an effort to settle the matter with Mrs. Banas, respondent entered into a written agreement with her on January 26, 1976, the eve of his first appearance before this Court. The agreement provided, inter alia, that if the total sum due -- as to which there was no dispute -- had not been repaid by September 15, 1976, Mrs. Banas might then enter a consent judgment against respondent in the stipulated amount. Each party later claimed that the other repudiated the agreement. While it eventually developed that this dispute was not a matter of our immediate concern, it may be noted that it did provoke a second hearing before this Court and considerably protracted these proceedings. Finally, on December 17, 1976 respondent paid Mrs. Banas a total of $41,853.69, including interest and an agreed counsel fee of $1,500.

Despite his personal friendship with Mrs. Banas and the fact that he seldom if ever charged her for the legal work he performed for her, there is no doubt that respondent and

Mrs. Banas stood in an attorney-client relationship. Whether or not a fee is paid, one who assumes to give legal advice takes on the role of an attorney. Shoup v. Dowsey, 134 N.J. Eq. 440, 475-76 (Ch. 1944). The fact that the advice in this instance was more of a business than of a legal nature, does not relieve respondent of a duty to adhere to the high ethical standards exacted of a lawyer. In re Carlsen, 17 N.J. 338, 345-46 (1955). The evidence clearly shows that respondent lent his client's funds to other clients and to himself without first disclosing, in each instance, exactly what he proposed to do, without explaining to her the possible conflicts of interest that might arise, or suggesting that she might be wise to take the advice of independent counsel. Such conduct violates DR 5-101(A), DR 5-104, and DR 5-105(B) as well as prior Canon 11. Were this the extent of respondent's misconduct it would possibly have deserved no more than a reprimand or brief suspension. But the second count charged against him is more serious.

II

During the investigation of Mrs. Banas' complaint the Central Ethics Unit found it necessary to employ a certified public accountant to examine respondent's records. He reported that respondent maintained two bank accounts. One, which was denominated an "attorney's account," was intended by respondent, and understood by the bank officials who opened it for him, to be a trust account. The other was used for all other business and personal purposes. The accountant found that the "attorney's account" had been for many ...


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