On an Order to Show Cause why respondent should not be disbarred or otherwise disciplined.
For reprimand -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman and Clifford and Judge Conford. Opposed -- None. Pashman, J., concurring and dissenting. Pashman, J., concurring in the reprimand.*fn*
A complaint was filed with the Middlesex County Ethics Committee charging respondent with conflicts of interest in connection with certain real estate transactions. After receipt of the Committee's report the Court directed the Central Ethics Unit to file a petition for an Order to Show Cause, which issued in due course. That petition asserts that respondent's conduct constituted violations of DR 5-105, DR 8-101, and DR 9-101, dealing respectively with conflicts, abuse of public position, and the appearance of impropriety.
The public position which respondent held during the times pertinent hereto was that of municipal attorney for the Borough of Carteret, to which he was appointed at the beginning of 1971. For some time prior to the events in question the Borough had implemented a policy of urban renewal pursuant to Federal Housing Authority (FHA) procedures. By ordinance it created the Carteret Redevelopment Agency (Agency), consisting of six members, five of whom were appointed by the municipal governing body. The Agency's function was to solicit proposals from developers for utilization of certain tracts for low and moderate income multi-family dwelling units. Gulya Brothers, Inc., a developer, submitted a proposal for a townhouse project on one of the tracts, which the Agency accepted. Thereafter,
on April 5, 1971, Gulya Bros. Redevelopment Corp. (Gulya) was established for the purpose of purchasing the land from the Agency and developing it, and marketing the townhouses which it erected thereon.
Upon acceptance of Gulya's proposal the Agency was required to obtain the necessary approvals from the municipal planning board, board of adjustment and governing body. Additionally, it was obliged to convey to the developer marketable title to the tracts involved. In due course the Agency, which was represented by its own counsel, successfully processed applications before the appropriate municipal bodies, and on November 15, 1971, the Borough gave final approval to the project.
Thereafter Gulya's attorney sought financing for the project on behalf of the developer but was unsuccessful. To aid in this endeavor the developer's attorney sought out the respondent, who had "handled matters for him in the past", was "familiar with mortgage financing", and had done "some extensive real estate work." In May or June of 1972 respondent, at the instance of Gulya's attorney, discussed the project with the principals of Gulya and at that point took over the representation of the developer, with the full consent of previous counsel. Prior to this respondent had not represented Gulya in any capacity whatsoever. Specifically, he had not appeared on the developer's behalf before the Agency; neither had he represented either the planning board or board of adjustment at the time of the Agency's applications to those bodies or at any other time. Respondent was, however, attorney for the Borough when the Council acted favorably on the board of adjustment's recommendation to grant the Agency's application for the necessary variances for this project.
Respondent's efforts on Gulya's behalf produced the required financing through a New Jersey mortgage company. The financing consisted of both the construction mortgage and permanent mortgages available to the buyers of the townhouses. Respondent's representation of the developer continued
throughout the initial construction stage of the project, during which time he was, as has been indicated, attorney for the municipality in which the development was located, albeit that representation of the municipality was not in any wise in connection with any business of or application on behalf of the developer.
Respondent also represented the mortgage company in sales involving permanent mortgages used in the purchase of townhouses from Gulya. In those same transactions he came to act as well on behalf of purchasers-mortgagors of the housing units at their closings of mortgage loan and title, under the following circumstances. In order to market the townhouses the developer engaged a real estate agent, whose function it was to attract buyers and assist those buyers in obtaining FHA approvals. It was the agent who led the buyers through whatever preliminary steps were required leading to execution of the contracts, and it was the agent who secured execution of those contracts. Respondent did not enter the picture until after the contracts had been signed by the buyer. The contract forms utilized by the agent, pursuant to these procedures, contained the following clauses:*fn1
Purchaser shall be responsible for paying the closing attorneys for the mortgage (sic) their legal fee for examination of title and recording of deed and mortgage and shall also be responsible for and shall pay for survey, mortgage title insurance, hazard insurance premium, escrow funds for taxes and insurance, appraisal and inspection fees and a one percent processing fee except as may be otherwise provided herein. * * *.
If purchaser uses seller's attorney, the seller will pay the legal fee for title examination, recording of deed and mortgage, survey, mortgage title insurance, appraisal and inspection fees.
By virtue of the arrangement last referred to either respondent or an associate in his office attended closings not only for the seller in sixteen instances, but also for the purchasers-mortgagors in at least fourteen of those closings.*fn2 At these closings purchasers were notified for the first time of the potential conflicts of interest arising out of respondent's multiple representations. They were presented with and executed two separate waiver and consent forms, one acknowledging and approving respondent's representation of purchaser and seller and the other acknowledging and approving his representation of mortgagor, mortgagee and seller.
As may be seen, then, there are two separate areas of potential conflict of interest called to our attention by the Committee report and the Central Ethics Unit's presentment.*fn3 The first centers about respondent's representation of the builder-developer while at the same time serving as attorney for the Borough of Carteret. The second focuses on his representation at the closing of the seller, the purchasers-mortgagors and the mortgagee under circumstances casting doubt on the informed nature of the consents given by the buyers to this multiple representation.
We address first the asserted conflict presented by respondent's representation of the developer while concurrently acting
as borough attorney. Respondent points out that at no time did his representation of Gulya involve any dealings or transactions with the Borough. All applications to municipal boards necessary to permit the Agency to convey clear title to the developer had been completed before respondent's representation of the developer commenced. Throughout the course of negotiations with the Agency involving Borough-related matters, Gulya was represented by its own attorney who eventually called on respondent for assistance when financing loomed as an obstacle.
With all of this, however, the fact remains that respondent's conduct was directly contrary to the mandate of this Court in In re A. and B., 44 N.J. 331 (1965). There it was noted that while in some situations it may be proper (within the proscription of DR ...