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In re Labendz

Decided: February 9, 1984.

IN THE MATTER OF RALPH W. LABENDZ, AN ATTORNEY AT LAW


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

For suspension -- Chief Justice Wilentz and Justices Clifford, Schreiber, Handler, O'Hern and Garibaldi. Opposed -- None.

Per Curiam

This disciplinary proceeding arose as a result of a presentment filed by the District XII Ethics Committee (Committee) against respondent, a member of the bar. It concerns his alleged participation in an attempt to perpetrate a fraud upon a federally insured savings and loan association to obtain a mortgage for a client. After a hearing, the Disciplinary Review Board (DRB) concluded that respondent's conduct violated DR 1-102(A)(3) (engaging in illegal conduct that adversely reflects on his fitness to practice law), DR 1-102(A)(4) (engaging in conduct involving dishonesty, fraud, deceit or misrepresentation), DR 7-102(A)(3) (knowingly failing to disclose that which he is required by law to reveal), DR 7-102(A)(5) (knowingly making a false statement of fact), and DR 7-102(A)(7) (counseling or assisting client in illegal or fraudulent conduct). The DRB recommended that respondent be suspended from the practice of law for one year. We agree.

I

Respondent was admitted to the practice of law in 1971. His area of specialization is residential real estate. He had an unblemished record until the events giving rise to these proceedings. His present difficulties arise from his submitting a false loan application to secure a mortgage from United States Savings and Loan Association for Victor and Mathilda DeLorenzo, prospective purchasers of a one-family home in Denville, New Jersey. The DeLorenzos located the property and contracted for its purchase through the services of Brenda Klipper, a real estate salesperson associated with the Weichert Agency.

The contract of sale provided for a purchase price of $100,000. Included in the contract was a clause that made the contract contingent on the securing of a mortgage of $80,000.

The DeLorenzos retained an attorney other than respondent to represent them in the purchase and at the closing. Klipper, however, referred the DeLorenzos to respondent for assistance in obtaining the mortgage. Respondent received a fee of $100 for this service. Victor DeLorenzo, Klipper and respondent met on May 14, 1982 to discuss financing the mortgage. This was the sole meeting respondent had with either of the DeLorenzos.

In its Decision and Recommendation, the DRB summarized the respondent's misconduct as follows:

Respondent testified that, at the meeting, DeLorenzo said he needed an $80,000 mortgage to meet the $100,000 purchase price. Respondent stated that he explained to DeLorenzo that the United States Savings and Loan Association would not allow a mortgage for more than 75% of the purchase price, and, in order to obtain an $80,000 mortgage, the purchase price would have to be "renegotiated" to $107,000. Respondent said Klipper agreed to attempt this. The contract was never renegotiated with the sellers.

Respondent filled out the loan application for the DeLorenzos, and by cover letter dated May 18, 1981 submitted the application to the United States Savings and Loan Association. That application stated the purchase price as $107,000. The purchase price on the sales contract received by the association had been altered from $100,000 to $107,000. The Committee was unable to determine who altered the contract, although respondent denied responsibility. On June 17, 1981 the association, relying upon the revised $107,000 figure on the sales contract issued a mortgage commitment to the DeLorenzos for $80,000.

The alteration of the sales contract did not come to light until mid-July, 1981 when the attorney retained by the DeLorenzos to represent them at the closing instructed his secretary to call Klipper for some information. That attorney testified that his secretary was told by Klipper that there would have to be two separate closings, one for $107,000, and a second for $100,000, and that the savings and loan association was not to know about the second closing with the lower purchase price. In a subsequent conference call with his client, and Klipper, the closing attorney asked Klipper for an explanation of the "two closings". Klipper referred him to the respondent. On the following day, respondent advised DeLorenzo's closing attorney that the purchase price had been "beefed up" to meet the bank's 25% down-payment requirement. Respondent further advised that he should not be concerned about the higher purchase price ...


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