On an order to show cause why respondent should not be disbarred or otherwise disciplined.
For suspension -- Chief Justice Wilentz, and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.
This disciplinary proceeding arises out of three presentments filed by the District 11-A Ethics Committee (the Ethics Committee), which concluded in each matter that respondent had committed unethical conduct. The Disciplinary Review Board (DRB) agreed with the Ethics Committee's finding of unethical conduct, and recommended that respondent be suspended from the practice of law for one year. Our independent review of the record leads us to accept that recommendation.
Respondent, a sole practitioner, was admitted to practice law in New Jersey in 1974. He is also admitted in New York and Connecticut. The presentments stem from three separate transactions.
DiMaria/Four Square Builders, Inc.
In early 1978, Robert DiMaria, Victor Canzanai, and John Weierstall, three carpenters, came to respondent for legal services in connection with the formation of a corporation to purchase and develop property in Montvale, New Jersey. Respondent expressed an interest in participating in the venture. The parties agreed and the respondent incorporated Four Square. Each party received a one-quarter interest in the corporation and contributed $5,000 to the corporate capital. Respondent's 25% share of the corporation was taken in the name of his wife because of certain problems involving a prior marriage.
The parties agreed that respondent would perform the legal work for the corporation, for which he would receive no compensation, and each of the other principals would contribute their own services, for which they would receive no compensation. Each man became an officer of the corporation, and corporate resolutions provided that any one of the four could
sign checks. The checkbook was maintained in respondent's office, and he was responsible for paying all the bills.
At no time did respondent advise any of the other three principals as to any actual or potential conflict of interest between himself and the other participants in the corporation. Nor did he discuss the advisability of a stockholders' agreement. No corporate books were completed and no meetings of stockholders or directors were ever conducted.
Four Square proceeded to subdivide and develop the Montvale property. Two houses were built and sold for a substantial profit.
After the Montvale project was completed, the other principals in Four Square decided to develop property in Saddle River with a mason contractor. While they did not ask respondent to be an officer of the new company, they did ask him to do the legal work for it, which he did. Carmas Construction Company was incorporated on July 19, 1978.
In the spring of 1979, respondent learned of a tract of land for sale in Washington Township. He suggested to DiMaria and Canzanai that this should be a Four Square project. (At this time, Weierstall was no longer active in the corporation.) The contract of sale between Four Square and the seller was contingent upon the purchaser's ability to subdivide the property into three lots. Respondent forwarded a $10,000 check from Four Square to the real estate broker. Although the check was apparently "good" when issued, the check was never turned over to the sellers or the sellers' attorney, but was retained in the real estate broker's file.
Four Square applied to the Washington Township Planning Board (Washington Township) for a subdivision of the property. Respondent appeared as attorney for Four Square Builders, accompanied to the various hearings by DiMaria, president of the corporation.
During the pendency of the subdivision application, respondent met with DiMaria and Canzanai to request that the equities
of the parties be adjusted so he would receive 40% of the profits and each of them would receive 30%. DiMaria and Canzanai refused.
Washington Township denied the three lot subdivision. The testimony as to when DiMaria and Canzanai knew what transpired thereafter is in conflict. Respondent states that after he and the other principals of Four Square were unable to agree on a revised split of profits, he advised them that since the Washington Township project "came to me and it's my deal, . . . I'm going to go ahead with it like you went ahead with Saddle River without me." DiMaria testified that he had no idea that respondent was going to "take the deal for himself."
In any event, after the planning board denied the proposal for a three-lot subdivision, respondent on behalf of Four Square filed a new application for a two-lot subdivision. Respondent said he entered into the contract to buy the property and proceeded with planning board approval in the name of Four Square because of the time limitation imposed by the seller. He then formed Timberland Corporation on August 9, 1979, with his wife listed as the sole stockholder. He later filed an amended application listing Timberland as the successor in interest. On January 2, 1980, the planning board granted the subdivision application. At some later point, respondent told DiMaria and Canzanai they could buy back into the project if they agreed to the 40/30/30 split and paid in additional money proportionally to repay him for the land.
During the late summer of 1979, problems developed between respondent and his land development partners concerning the construction of his home. He felt they were not devoting sufficient time to this project so his house could be completed on schedule. As a result of their deteriorating relationship, the partners retained another attorney to represent them.
In October 1980, respondent received $2,737.28 from the Borough of Montvale as a result of a civil suit he had filed on behalf of Four Square to release the cash deposit posted in
connection with subdivision improvements. He deposited this money in his trust account and disbursed $1,500 to himself. The balance was paid to other corporate creditors. Respondent had loaned Four Square $1,500 to pay a subcontractor. He claimed he told DiMaria at that time that he would take his money back as soon as Four Square had sufficient funds. There is a sharp conflict of testimony as to whether or not respondent was authorized to disburse $1,500 from his escrow account to repay his loan to the corporation. Nevertheless, there appears to be no question that the corporation's funds, received from the Borough of Montvale, were not turned over to the corporation but were disbursed through respondent's trust account during the negotiations between respondent and the other principals of the corporation in settling their disputes.
In the DiMaria/Four Square Builders matter, the DRB found that: Respondent created a conflict of interest when he involved himself as a business partner and as corporate attorney; he took away for his own benefit a corporate opportunity that belonged to his client Four Square; and he preferred himself as a creditor. Further, the DRB found that respondent's actions violated DR 5-104*fn1 when he entered into a business venture with his client.
Upon the death of her husband, Patricia Berman became the owner of two companies, Supro-Realty Corporation and Supro-Paint Corporation. The realty company owned the land and building in which the paint company maintained its office and business. A major creditor of the paint corporation was Pur-All Paint Products Co., Inc. Respondent's father-in-law,
Rubin Chaleff, was the principal of Pur-All, and it is undisputed that respondent was the attorney for Pur-All.
In August, 1982, respondent attended a meeting concerning Supro-Paint Corporation. He had been recommended to Berman by Chaleff, who had been a close friend and adviser of her late husband. Mrs. Berman knew that respondent was Chaleff's son-in-law. At this time, Supro-Paint ...