Labendz, Matter of

• Decision Date: 09 February 1984
• Citation: 471 A.2d 21,95 N.J. 273
• Parties: In the Matter of Ralph W. LABENDZ, An Attorney at Law.
• Court: New Jersey Supreme Court

Page 273

95 N.J. 273

471 A.2d 21

In the Matter of Ralph W. LABENDZ, An Attorney at Law.

Supreme Court of New Jersey.

Argued Jan. 10, 1984.

Decided Feb. 9, 1984.

Colette A. Coolbaugh, Counsel, Trenton, for complainant Disciplinary Review Bd.

Henry N. Luther, III, Morristown, for respondent (Dillon, Bitar & Luther, Morristown, attorneys; Mary A. Powers, Morristown, on the brief).

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 since the savings and loan association would never pick up the discrepancy. Respondent recommended against following the "two closing" plan mentioned by Klipper because the closing attorney's firm would be "sticking (its) necks out."

Instead he again suggested that the contract be "renegotiated" to $107,000 with reference on the closing statement to a credit for $7,000 to the DeLorenzos, as purchasers.

The closing attorney declined both options presented. Instead, his firm notified the United States Savings and Loan Association of the discrepancy. As a result the existing Loan Commitment of $80,000 was rescinded and an amended commitment of $75,000 was issued. Subsequently, the closing attorney's firm lodged an ethics complaint against respondent. ¹

In his testimony before the Committee's hearing panel respondent claimed that his remarks in the July 19 telephone call to the attorney for the closing were misinterpreted. He admitted recommending that the contract be "renegotiated" and stating that this was proper if there was an "appropriate" credit reflecting a "legitimate" expense. This allegation prompted the following exchange between the chairperson and the respondent:

THE CHAIRPERSON: What legitimate expense can there be to account for that additional $7,000?

THE WITNESS: Could be for closing costs, moving expenses, items that were taken from the house.

* * *

* * *

THE CHAIRPERSON: Was it your understanding in this particular case that the difference between the 100,000 that had already been agreed upon and the $107,000 that was a proposed amendment was to be accounted for by the sale of any additional items of value?

THE WITNESS: Actually, I left it to the realtor on this. So, I can't recall what I had in mind.

THE CHAIRPERSON: And when you suggested in your conversation and your lie with the closing attorney that there was another way of dealing with the problem, and that was at that late date to go back to the seller and attempt to renegotiate the contract, did you have in mind that the buyers were going to purchase some new or additional rights or property for the additional $7,000?

THE WITNESS: No.

II

Upon our independent examination of the record, we agree with the DRB's conclusion that respondent's violations of DR 1-102(A)(3), DR 1-102(A)(4), DR 7-102(A)(3), DR 7-102(A)(5), and DR 7-102(A)(7) have been clearly and convincingly established.

Respondent knowingly assisted DeLorenzo and Klipper in an attempt to perpetrate a fraud upon the United States Savings and Loan Association. It is undisputed that there never was a contract for $107,000. When respondent met with Klipper and Victor DeLorenzo to fill out the application, he unquestionably knew that there was no $107,000 contract in existence and that the true contract price was $100,000. He also knew that the suggested renegotiation was a sham, for he admitted that he did not intend the buyers to purchase any new rights or property for the alleged $7,000 credit.

Respondent therefore violated DR 1-102(A)(3) and DR 1-102(A)(4) by engaging in illegal and fraudulent conduct in completing and submitting to the United States Savings and Loan Association the mortgage application, he knew to be false; DR 7-102(A)(5) by knowingly making a false statement of fact; DR 1-102(A)(7) by counselling and assisting his client to engage in conduct he knew to be illegal and fraudulent; and DR 7-102(A)(3) by failing to disclose in his representation of his client that which he was required by law to reveal.

The serious nature of respondent's conduct, involving misrepresentations and violations of law, led the DRB to recommend the imposition of a one year suspension from the practice of law.

III

Respondent acknowledges that his conduct was unethical and violates the Disciplinary Rules. Nevertheless, he submits that this single violation, resulting in no harm to any party involved, appearing in an otherwise exemplary record does not merit the penalty of suspension for one year.

In support of his position, respondent points to his unblemished record prior to this transaction; to the many letters from attorneys and other members of...