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In re Krakauer

Decided: July 25, 1979.

IN THE MATTER OF JACK KRAKAUER, AN ATTORNEY AT LAW


On Order to Show Cause why respondent should not be disbarred or otherwise disciplined.

For suspension -- Justices Mountain, Clifford, Schreiber and Handler and Judge Halpern. Opposed -- None.

Per Curiam

Respondent has been found guilty of a number of charges of unethical conduct by the Disciplinary Review Board. Because the facts which formed the basis for the conclusions reached by the Board are extremely complicated, we have sought to extract and set forth below only those events which bear significantly upon the result we reach.

Two procedural points deserve brief mention. The person who filed the complaint before the District Ethics Committee was not present at the hearings before that body, having apparently left the jurisdiction for parts unknown. Respondent moved to dismiss the complaint because of complainant's absence. The motion was properly denied. It is not necessary that a complainant appear before an Ethics Committee. Complaints that should be and are pressed against respondents sometimes reach the Committee from anonymous sources or result from information to which a committee member becomes privy in some accidental way. Normally, of course, the complainant appears and testifies but there is no jurisdictional requirement that this occur.

Secondly, respondent took exception to the fact that the attorney who presented the matter to the Ethics Committee also

represented the complainant and his wife in a civil action against respondent. This attorney was chosen by the Committee because of his comprehensive knowledge of the intricate factual background of the matter. It would have been sounder procedure to have had the choice of the presenter first approved by the Assignment Judge pursuant to R. 1:20-2(l)(1)(i), but here there is no suspicion of prejudice. Again, the motion to dismiss was properly denied.

We turn now to the facts of the case. In early 1974, Carlo Corporation, owned by complainant Carlos de la Fuente and his wife, purchased the assets, good will and liquor license of a restaurant business in the City of Passaic. At the same time Mr. and Mrs. de la Fuente leased the portion of the building in which the restaurant was located. Both the seller of the business and the landlord of the property were corporations owned or controlled by one Joseph Lipari. The purchase price largely took the form of a series of promissory notes secured by a purchase money security agreement on the tangible assets of the restaurant and a pledge of the stock of Carlo Corporation. These were assigned by Lipari to one Mae Chiaramonte in whose favor there was endorsed a "loss payable" clause on the fire policy covering the secured assets.

Throughout these transactions, respondent represented Lipari. Mr. and Mrs. de la Fuente were represented by other counsel.

On June 30, 1974, a fire substantially destroyed the restaurant premises rendering them unusable. Immediately after the fire, the de la Fuentes communicated with respondent. He undertook to act for them in settling the fire loss and in arranging, with the consent of Mae Chiaramonte, to use the insurance proceeds which she would receive for the loss of personal property, to reconstruct the building. As part of this arrangement it was understood that Mr. and Mrs. de la Fuente would somehow manage to purchase the property. This arrangement was never reduced to writing.

Respondent retained a firm of commercial fire insurance adjusters, Sarasohn & Co., to adjust the claim with the insurer. Their commission would be 10% of any recovery. With the consent of the de la Fuentes, respondent agreed with Sarasohn & Co. that he would be paid one-half of this commission. He described this as the "normal" arrangement. Respondent testified that he performed legal services in connection with the fire loss and that his share of the adjuster's commission represented his legal fee for these services. This arrangement, also, was never reduced to writing.

It had been apparent from the start that the de la Fuentes would need financial assistance of about $50,000 in order to effect the purchase of the property. Respondent agreed to endeavor to negotiate the necessary mortgage loan for a 10% commission. While this agreement was never set forth in any writing, it was understood that the commission would become payable only if the loan were to be arranged through some outside source; if financing ...


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