Lanza, In re

• Decision Date: 18 July 1974
• Citation: 65 N.J. 347,322 A.2d 445
• Parties: In the Matter of Guy J. LANZA, An Attorney at Law.
• Court: New Jersey Supreme Court

Page 347

65 N.J. 347

322 A.2d 445

In the Matter of Guy J. LANZA, An Attorney at Law.

Supreme Court of New Jersey.

Argued Feb. 19, 1974.

Decided July 18, 1974.

S. Victor DeLucia, Rutherford, for Bergen County Ethics committee.

David A. Pressler, Ridgefield, for respondent (Okin, Pressler & Shapiro, Ridgefield, attorneys).

Martin L. Haines and Emanuel A. Honig, Mount Holly, appeared for amicus curiae New Jersey State Bar Association (Floyd Amoresano, Paterson, of counsel).

John M. Boyle, Elizabeth, appeared for amicus curiae New Jersey Mortgage Lenders Attorneys Committee (William D. Hogan, co-counsel).

James J. Madden, Collingswood, filed a brief for amicus curiae Mortgage Lenders Attorneys Committee of Camden County (Field and Madden, attorneys).

PER CURIAM.

The Bergen County Ethics Committee filed a presentment with this Court against respondent, Guy J. Lanza, who has been a practicing member of the bar of this State since 1954.

The Committee specifically found that respondent's conduct violated DR5--105. This Disciplinary Rule forbids an attorney to represent adverse interests, except under certain very carefully circumscribed conditions. ¹

In April or May of 1971, Elizabeth F. Greene consulted respondent with respect to the sale of her residence property in Palisades Park, New Jersey. Mr. Lanza agreed to act for her. In due course a contract, apparently prepared by a broker, was signed by Mrs. Greene as seller as well as by the prospective purchasers, James and Joan Connolly. The execution and delivery of the contract took place in Mr. Lanza's office, although he seems to have played little or no part in the negotiation of its terms. By this time he had agreed with the Connollys that he would represent them, as well as Mrs. Greene, in completing the transaction. The testimony is conflicting as to whether or not Mrs. Greene had been told of this dual representation at the time she signed the contract. Mr. Lanza says that she had been told, but according to her recollection she only learned of this at a later date from Mrs. Connolly. In any event it is quite clear that respondent agreed to act for the purchasers before discussing the question of such additional representation with Mrs. Greene.

The contract as originally drawn provided for a closing date in late July, 1971. At Mrs. Greene's request this date was postponed to September 1. A short time later, circumstances having again changed, Mrs. Greene found that she would now prefer the original date. This proved satisfactory to the purchasers but Mr. Connolly told Mrs. Greene that at this earlier date he would not have in hand funds sufficient to make up the full purchase price of $36,000. Of this sum he would lack $1,000. He suggested, however, that the parties might close title upon the earlier date if Mrs. Greene would accept, as part of the purchase price, a check for $1,000 postdated approximately 30 days. Mrs. Greene was personally agreeable to this. She consulted respondent who advised her that he saw no reason why she should not follow this course.

The closing accordingly took place late in July and in accordance with the foregoing arrangement, Mrs. Greene received, as part of the purchase price, Mr. Connolly's check in the sum of $1,000 dated August 31, 1971. Shortly after this latter date she deposited the check for collection and it was returned because of insufficient funds. When questioned, Mr. Connolly said that after he and his wife had taken possession of the property they discovered a serious water condition in the cellar. He added that Mrs. Greene had made an explicit representation that the cellar was at all times dry. For this reason he refused to make good the check, saying that it would cost him $1,000 to rectify the condition in the cellar. Mrs. Greene denied that she had ever made any representation whatsoever. She immediately got in touch with respondent who did nothing effective on her behalf. She then retained other counsel and has subsequently initiated legal proceedings against the Connollys.

We find respondent's conduct to have been unprofessional in two respects. In the first place, the way in which he undertook the dual representation failed to meet the standards imposed upon an attorney who elects to follow such a course. In the second place, after the latent conflict of interests of the two clients had become acute, he nevertheless continued to represent both parties. At that point, rather than going forward with the matter as he did, he should have withdrawn altogether.

Mr. Lanza first undertook to act for the seller, Mrs. Greene. This immediately placed upon him an obligation to represent her with undivided fidelity. Despite this obligation, he later agreed, without prior consultation with Mrs. Greene, to represent Mr. and Mrs. Connolly, whose interest in the matter was of course potentially adverse to that of his client. He should not have undertaken to represent the purchasers until he had initially conferred with Mrs. Greene. He should have first explained to her all the facts and indicated in specific detail all the areas of potential conflict that foreseeably might arise. He should also have made her aware that if indeed any of these contingencies should thereafter eventuate and not prove susceptible of ready solution in a manner fair and agreeable to all concerned, it would then become his professional duty immediately to cease acting for all parties. Only after such a conference with his client, and following her informed consent, would he have been at liberty to consider representing the purchasers. They, too, were entitled to the same explanation as is set forth above, as well as being told of respondent's existing attorney-client relationship with the seller.

The second instance of misconduct arose after respondent learned that the purchasers would not be able to pay the full purchase price in cash at the time of closing title. At that point adequate representation of the seller required that her attorney first strongly insist on her behalf that cash be forthcoming. Failing this, and if the seller persisted in her wish to close upon the earlier date, her attorney should have vigorously urged the execution and delivery to her of a mortgage from the purchasers in the amount of $1,000, or of other adequate security, in order to protect her interest pending receipt of the full cash payment. We think it fair to assume that had respondent not found himself in a position of conflicting loyalties, his representation of the seller would have taken some such course. Had the purchasers persisted in their unwillingness to pay the full amount in cash at the time of closing and had they also refused to execute and deliver a mortgage or other security, respondent should have immediately withdrawn from the matter, advising both parties to secure independent counsel of their respective choosing. At that point in time it would have clearly been impossible for any single attorney adequately and fairly to represent both sides.

This case serves to emphasize the pitfalls that await an attorney representing both buyer and seller in a real estate transaction. The Advisory Committee on Professional Ethics, in its Opinion 243, 95 N.J.L.J. 1145 (1972) has ruled that in all circumstances it is unethical for the same attorney to represent buyer and seller in negotiating the terms of a contract of sale. Here the respondent did not enter into these negotiations so he does not come under the ban of this rule. Canon 6 declared, however, that '(i)t is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts.' DR 5--105 is at least as strict in the requirements it lays down and in subparagraph (C) carries forward the injunction quoted above by prohibiting multiple representation unless 'each (party) consents to the representation after full disclosure of the facts and of the possible effect of such representation on the exercise of his (the attorney's) independent professional judgment on behalf of each.'

The extent of the necessary disclosure is what is important. As Opinion 243, Supra, makes clear, this is a question that must be conscientiously resolved by each attorney in the light of the particular facts and circumstances that a given case presents. It is utterly insufficient simply to advise a client that he, the attorney, foresees no conflict of interest and then to ask the client whether the latter will consent to the multiple representation. This is no more than an empty form of words. A client cannot foresee and cannot be expected to foresee the great variety of potential areas of disagreement that may arise in a real estate transaction of this sort. The attorney is or should be familiar with at least the more common of these and they should be stated and laid before the client at some length and with considerable specificity. Of course all eventualities cannot be foreseen, but a great many can. Here respondent was representing Mrs. Greene, a seller of property. Generally a seller who has entered into a mutually binding contract of sale is principally interested in securing the full purchase price to which he or she is entitled. As counsel experienced in this field of practice well known, to allow a purchaser to take possession of the premises in question before the entire consideration has been received, either in the form of cash or purchase money mortgage, will often prove contrary to the seller's best interests. So it was here.

For the reasons set forth above, we deem respondent's conduct to merit censure. He is hereby reprimanded.

For reprimand: Chief Justice HUGHES and Justices JACOBS, HALL, MOUNTAIN, SULLIVAN, PASHMAN and CLIFFORD--7.

Opposed: None.

PASHMAN, J. (concurring).

At the very foundation of our adversary system reposes the basic tenet that one attorney may not represent two clients having conflicting...