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 is an attorney-disciplinary case in which the Disciplinary Review Board (DRB or Board) determined that respondent, Richard L. Barbour, had committed a number of ethics violations relating to his representation of three different clients. These infractions included a failure to perform expected and necessary legal services, gross negligence, fee overreaching, and inadequate record keeping, reflecting adversely on respondent's fitness to practice law. The Board also considered mitigating factors relating to respondent's medical illness and alcoholism. The DRB recommended a suspension of two years as appropriate discipline.
The facts, as well as the inferences to be drawn from the facts, are quite complicated. Our independent review of the record brings us to a somewhat different estimation of the nature and gravity of respondent's wrongdoings. Our assessment of the wrongs is tempered in some measure by according greater weight to the mitigating factors, leading us to impose lesser discipline than recommended by the Board. We therefore set forth at length our understanding of the record, dealing initially with the charged ethics violations in each of the matters, and then with the mitigating factors.
Defendant represented the estate of Walter H. Bachmann, who died on November 5, 1972, a resident of Burlington County. In his will the decedent named his daughter as executrix
of the estate. On November 10, 1972, respondent was retained to represent the estate both as an attorney and as an accountant, at an agreed fee of 5% of the estate and a $10,000 retainer. It was anticipated that it would take about two years to close out the estate.
Part of the charges against respondent relate to his alleged mishandling of the estate in terms of obtaining property valuations. The estate property consisted of a house and ninety-six acres of unimproved land. Respondent retained an appraiser, who was acceptable to the heirs, to evaluate the estate property. By letter dated December 15, 1972, respondent informed the heirs that the appraiser believed that the value of the property to be about $6,000 per acre and could realize up to $8,500 per acre. The property, at that time, was subject to a one-year moratorium. As a result, the appraiser believed it was impossible to "clearly estimate the effect of the moratorium on land values." Nevertheless, the formal appraisal report dated January 5, 1973, listed the fair market value at $486,100, an average per acre value of $5,400.
Respondent prepared all of the estate tax returns and income tax returns based on the appraisal. The estate tax return was audited in October 1973. The tax was then reduced by $21,612 because of the inclusion of the executor's commission and the real estate commission, which had not originally been listed as deductions. The resulting estate tax was approximately $115,000. Respondent, on January 30, 1974, successfully petitioned the Internal Revenue Service to permit the heirs to pay this tax over a ten-year period.
Respondent also attempted to sell the property. The heirs rejected offers of $4,500 an acre, believing the property was worth between $6,000 to $8,000 an acre. There were at least two sale prospects for the homestead property for which respondent had drawn up the contracts, but in each case the sale was not completed. In October 1974, an agreement of sale was entered into for $476,112, reflecting a per-acre price of $5,600
for about 85 acres. However, the sale was subject to several contingencies, and when it had not been completed by 1976, respondent was successful in having the $10,000 deposit forfeited to the estate.
The homestead property was eventually sold in 1975 for $70,000. Before that sale was completed, respondent was successful in having an IRS lien removed and placed only against the vacant property.
In late 1976 or 1977 the federal government revoked the estate's ten-year payout agreement for delinquency. In late November or early December 1978, respondent was advised that the IRS would seize and sell the estate property for unpaid taxes. Because of the problems the estate was having selling the property, respondent suggested an "offer in compromise" in which the heirs would pay a portion of the taxes less than the amount due in settlement of the total claims. That offer, filed in January 1979, was initially rejected by the IRS because it had not been accompanied by a deposit check; however, it was accepted after respondent resubmitted the offer with a $50,000 check in the spring of 1979.
After the statute of limitations for amending the tax returns had expired, the property became subject to more extensive restrictions under the New Jersey Pine Lands Comprehensive Management Plan. Another appraisal was obtained showing that the property was subject to various moratoriums and had been unsuccessfully marketed; as a result the property had little or no market value. Following negotiations, the IRS accepted the new valuation, resulting in the elimination of any tax due and a refund of the $50,000.
The major criticism of respondent's conduct in this matter is that he mishandled a simple estate. According to the District Ethics Committee (Committee), the issues in the estate were not particularly complex "but were made so as a result of Mr. Barbour's failure to appreciate the impact of the moratorium on the tract and contemplate that contingency in dealing with the
estate." The Committee also found that respondent showed a "lack of business acumen in the negotiation of the contract of sale in that it was nothing more than a glorified option, with standards so one-sided as to require no real commitment on the part of the purchaser." It held that respondent's failure to grasp basic threshold concepts of estate management constituted gross negligence.
The DRB, which accepted the Committee's findings, concluded that respondent's efforts in this matter constituted gross negligence. It believed that there is and could be no dispute that respondent expended much effort and time on this matter. Nevertheless, it found that the estate became complicated because of respondent's failure to appreciate the impact of the moratorium on the tract.
From this record it is certainly arguable that the proofs indeed preponderate in favor of a conclusion that respondent mishandled this estate and failed to perform in accordance with the standards applicable to an attorney skilled and knowledgeable in estate work. Nevertheless, we are unable to conclude that the evidence is clear and convincing that respondent was guilty of gross negligence. Our lack of conviction under this burden of proof is influenced by the fact that respondent relied on an appraiser; he apparently accepted the $4,500 per acre valuation because the moratorium was to be lifted within a year. Moreover, the heirs sought to sell the property at comparable valuations and, for a time, it appears there were potential purchasers. It is not suggested that had the property initially been assigned a nominal value because of the moratorium, this would then have been accepted earlier by the IRS. As noted, the respondent later was able to withdraw the offer in compromise and obtain a refund of the $50,000. An IRS attorney familiar with the estate was not especially critical of respondent's handling of the estate, and suggested that the lack of marketability of the land was not a simple consideration, particularly in light of the sales contract price of $476,112. Another attorney also believed that the valuation of the estate was not a
simple matter, particularly since value as of the date of the death is the standard. Moreover, the respondent did initially obtain unusually favorable treatment in terms of a ten-year pay-out plan.
Nevertheless, there was an extremely long delay in finally straightening out and resolving the estate. And, it may be that the contracts of sale could have been drawn more favorably to the estate. We are satisfied that the delay was in large measure attributable to respondent's inattentiveness, neglect, poor judgment, and a lack of professional perceptiveness, as found by the tribunals below. We therefore determine that there was a breach of ethics involving neglect of a client's interest contrary to Disciplinary Rule 6-101(A)(2).
Another criticism of respondent relates to excessive fees. Respondent maintained that he had informed the heirs that his fee could exceed the 5% he had stated in his original retainer; he also claimed that it was not contemplated that the fee would automatically be decided by the probate court. Respondent said that he had discussed his fees with the heirs in 1976, and it was orally agreed that his fee would be $27,500. Respondent claimed that before engaging in the offer and compromise, he made a new arrangement with the executrix, Mrs. Matthews, in which they agreed on a fee of one-third of savings over the $50,000 offer in compromise. He therefore billed the estate for $16,670, which represented one-third of the $50,000 refund. This was in addition to the total fee of $22,500, which he had previously received. He conceded that his actual billing was over 5% and that it was not approved by the Burlington County Probate Court. Mrs. Matthews testified before the ethics committee that when she received respondent's bill of $16,670, which represented one-third of the $50,000 refund, she was "shocked".
The Committee determined that respondent's fees were "substantially higher than those customarily charged by practitioners in the area." It further found that the fees were unreasonable,
finding that the $16,667 for the return of the $50,000 constituted overreaching. However, it did not find by clear and convincing evidence that there was an intent to overreach. The DRB likewise concluded that respondent's fees were ...