On an order to show cause why respondent should not be disciplined.
For dismissal -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock, O'Hern, Garibaldi and Stein. Opposed -- None.
[120 NJ Page 667] This is an attorney-disciplinary matter. Respondent, Lee B. Roth, was found to have violated our ethics rules by attempting to obtain a real estate commission in a transaction in which he also served as the attorney for a prospective buyer of residential real estate. The case impels us to determine the appropriate ethics standards governing an attorney who undertakes to represent a client as both attorney and real estate broker in the same transaction.
The charges in this case were brought before the District XIII Ethics Committee (DEC), which found that respondent's conduct in representing a client as both an attorney and real estate broker reflected adversely on his fitness to practice law in violation of Disciplinary Rule (DR) 1-102(A)(6), which provided that "[a] lawyer shall not . . . [e]ngage in any other conduct that adversely reflects on his fitness to practice law."*fn1 The DEC based that conclusion on what it characterized as respondent's attempt to receive a broker's commission without having performed any brokerage services, the conflict of interest posed by the broker/attorney arrangement, and the "unseemly appearance" created by the arrangement. The matter was appealed to the Disciplinary Review Board (DRB), which determined that the DEC's conclusions were supported by clear and convincing evidence and further determined that respondent, not having a broker's license, was not entitled to seek a commission. The DRB recommended the imposition of discipline. Respondent appealed the DRB's decision to this Court. At our request, the New Jersey Real Estate Commission and the New Jersey State Bar Association have submitted amicus curiae briefs to address this unclear area of attorney ethics.
Respondent has been a member of the New Jersey bar since 1962 and is a well-respected authority on real estate law. Although at the time this matter arose respondent had taken the course to become a real estate broker and had passed the examination administered to real estate salespeople, he was not
a licensed real estate broker. In January 1984, a paralegal employed in respondent's law firm became interested in purchasing a house she had seen for sale located in Flemington, New Jersey. The listing price for the house was $123,900. The paralegal asked respondent to assist her in purchasing the house and in finding a way of lowering the purchase price. Respondent told her that he would act as both her lawyer and broker in the transaction, and that as the selling real estate broker, he would be entitled to a fifty-percent share of the commission, which he would apply to a reduction in the purchase price.
Respondent's client subsequently communicated with the real estate agency owned by Carl D. Bayuk, who was the listing broker. She expressed interest in the property and stated that respondent would act both as her attorney and as the selling real estate broker. Because he was confused about respondent's dual role as attorney and broker, Bayuk called respondent directly, and respondent explained to Bayuk that, as an attorney, he, respondent, was authorized to sell real estate without a broker's license and that he would be entitled to half of the six-percent commission.
On January 20, 1984, respondent's client made a written offer of $114,000 to the sellers expressly conditioned on "the assumption that you have agreed to pay your real estate broker six percent (in this case $6,840) and that your real estate broker will divide the commission with our lawyer, who agrees that that commission be credited against the purchase price." That offer was rejected, as was a second offer, conditioned on the identical terms, for $118,500. Shortly thereafter, the property was sold to another buyer for the full listing price.
The listing real estate broker, Bayuk, subsequently filed an ethics complaint against respondent. At the hearing before the DEC, respondent stated that he had advised both his client and Bayuk that he would act as the attorney and the selling real estate broker. He testified that he did not intend to benefit
personally from the arrangement and that his share of the real estate commission was to have been applied on behalf of his client to reduce the purchase price of the property.
The DEC found that respondent had not performed any brokerage services and therefore was not entitled to any brokerage commission. The DEC also found that respondent's acting as both attorney and broker in the same transaction, combined with his being compensated in both capacities, created a conflict of interest. Thus, as noted, the DEC concluded that respondent had violated DR 1-102(A)(6). Although it did not comment on whether respondent had in fact performed any brokerage services, the ...