Mussman's Case, In re, No. 6280

• Decision Date: 30 December 1971
• Docket Number: No. 6280,O
• Citation: 111 N.H. 402,286 A.2d 614
• Parties: In re MUSSMAN'S CASE. riginal.
• Court: New Hampshire Supreme Court

Page 614

286 A.2d 614

111 N.H. 402

In re MUSSMAN'S CASE.

No. 6280, Original.

Supreme Court of New Hampshire.

Dec. 30, 1971.

Wayne J. Mullavey, Jr., Exeter, Joseph A. DiClerico, Atty. Gen., and N. Michael Plaut, Keene (by brief and orally), for Board of Governors of New Hampshire Bar Association.

Devine, Millimet, McDonough, Stahl & Branch, Manchester (Joseph A. Millimet, Manchester, orally), for Mack M. Mussman.

PER CURIAM.

Petition for disciplinary action on a complaint of professional misconduct filed in this court against Attorney Mack M. Mussman of Littleton by the Board of Governors of the New Hampshire Bar Association. The complaint set out in detail Mussman's conduct alleged to constitute violations of the ethical standards of the bar of New Hampshire. It also specified certain canons and disciplinary rules of the ABA Code of Professional Responsibility (1969), adopted by the New Hampshire Bar Association in January 1970, which his conduct is alleged to have violated. See In re Unification of New Hampshire Bar, 109 N.H. 260, 248 A.2d 709 (1968). This court ordered the matter referred to Judicial Referee Amos N. Blandin, Jr., for hearing and report and further ordered that Mussman be notified of the pendency of the petition and complaint by service on him of a copy thereof with the orders thereon. See In re Ruffalo, 390 U.S. 544, 88 S.Ct. 1222, 20 L.Ed.2d 117 (1968); 1 Antieau, Modern Constitutional Law s. 6.91 (supp.1970).

At the hearing before the referee the records in Stephenson v. Stephenson, 111 N.H. --, 278 A.2d 351 (1971) and Morin v. Morin (Grafton Eq. 10,398), wherein as counsel for one of the parties the alleged unethical conduct of Mussman took place, were offered in evidence and marked as exhibits. In addition thereto the testimony of various witnesses, including that of Mussman himself, was received in evidence subject to cross-examination. Requests for findings and rulings were submitted to the referee. Among the findings and rulings made by him was a ruling that the burden was on the bar association to prove its charges by clear and convincing proof, and a finding that 'the conduct of the defendant Mussman was highly prejudicial to the administration of justice, and that it reflects drastically on his fitness to practice law.'

The matter is now before this court on the following issues: (1) whether the record supports the findings and rulings of the referee, and (2) if it does, what action should be taken in regard to Attorney Mussman.

Count 1 of the specifications in the petition deals with an action of divorce brought in the Superior Court of Grafton County by Katherine Holman Stephenson against Edwin Charles Stephenson and two bills in equity instituted by her in the course thereof to set aside as fraudulent a transfer of certain assets of Edwin. Mussman was counsel for Edwin in these matters. Edwin was the sole stockholder in Ski-Pine Club, Inc. which owned land and buildings in Sugar Hill consisting of 114 acres and a 22 room house which were free of encumbrances. As part of the divorce proceedings counsel for Katherine had obtained a court order allowing the above property to be appraised and photographed. Before this could be done, however, a corporation was formed by Mussman under the name of Sugar Hill Manors, Inc. of which Mussman was elected president, treasurer and a director. 300 shares of capital stock were authorized at the organization meeting of Manors. Ski-Pine conveyed to manors its land and buildings valued by Edwin's expert at $40,000 and by Katherine's expert at $100,000 and received therefor 75 shares of Manors stock. Mussman paid in $1000 and was issued 151 shares of Manors. When counsel for Katherine called Mussman to arrange for an expert to visit this property in connection with the divorce proceeding, he was informed by Mussman that it no longer belonged to Ski-Pine but had been transferred to a new corporation, Manors. Katherine then insituted two bills in equity alleging in part that Edwin was then $2400 in arrears in support payments ordered by the court and that the transfer was fraudulent. They were tried together with the divorce proceeding by Johnson, J.

Mussman testified in those proceedings that the transfer of the Ski-Pine property to Manors was the first step in a plan he had devised to develop the property and to provide Edwin with employment. The buildings were to be renovated for use as a clubhouse and the land sold as 131 lots. Mussman intended to invest $100,000 and had secured other investors who would make available an additional $200,000. He testified that he and the other investors could benefit from the project to an amount of $250,000 each for their investment, or $750,000 total, and that Edwin would also benefit in the amount of $250,000. Mussman testified at a hearing on a preliminary injunction in the bills in equity that it was proposed to hire Edwin as manager at $10,000 to $15,000 salary per year. This was modified to $7500 plus room and board at the hearing on the merits. The records of a corporate meeting of the directors of Manors (Mussman, his law associate, now his partner, and another person, not Edwin) showed a vote to employ Edwin for one year at a mutually agreed upon salary.

Mussman stated that for tax purposes he and the other investors would make their $300,000 investment by way of loans at 7 1/2 percent interest. For a total cash investment of $3000 in Manors these investors were to receive three-fourths of its stock. Edwin, through Ski-Club, for the transfer to Manors of property valued at $40,000 by one expert and at $100,000 by another, was to receive the remaining one-fourth of the stock. The plan envisioned an eventual board of directors of Manors made up of Mussman and the other cash investors. Edwin was not to be a director. A temporary injunction against proceeding with the plans was issued March 13, 1970 with the proviso that 'if the whole long-term plan of Sugar Hill Manors, Inc. were reduced into legally enforceable contracts under which Mrs. Stephenson would have sufficient legal rights to realize the value of the asset in question in the event that she was awarded the land and buildings as part of a divorce decree, then the Court would reconsider the injunctive relief . . . granted.' There is no evidence that the plans for development were ever pursued further, or reduced 'into legally enforceable contracts.'

In its final decree the Trial Court (Johnson, J.) found that at the time of the transfer of land from Ski-Club to Manors 'there was no question but that the matter of a property settlement between the Stephensons would be a matter of controversy in the divorce proceeding. The Court finds that the purpose and intent of this transfer under the circumstances was to deprive Mrs. Stepenson of her right to have the Court make a meaningful property settlement . . . and hence the transfer was intended to defeat and defraud Mrs. Stephenson's rights.' The court ordered it rescinded and set it aside and the property reconveyed. This court, on appeal, found and ruled this finding and order warranted by the evidence. Stephenson v. Stephenson, 111 N.H. --, 278 A.2d 351 (1971). The referee on the evidence before him could also properly find, as he did, that the transfer was fraudulent.

The bar association in its complaint against Mussman charges that the above action taken by him on behalf of his client was contrary to Canon 7 and in violation of Disciplinary Rule 7-102(A)(1) of the ABA Code of Professional Responsibility which forbids a lawyer to take action 'on behalf of his client when he knows or when it is obvious that such action would serve merely to harass or maliciously injure another.'

At the hearing on the complaint, Mussman by testimony and argument took the position that there was a legitimate business reason for the transfer of the property as it was an attempt to rehabilitate his client and to reconcile him with his wife. The referee found, however, that the purpose and intent of the transfer was to deprive Mrs. Stephenson of her right to have the trial court make a meaningful property settlement and that the desire for reconcilitation played no substantial part with either Edwin or his counsel Mussman. The referee further found that the transfer was designed primarily to harass and delay Mrs. Stephenson and to benefit financially Mussman and the other investors. A review of the evidence in the trial court and in the disciplinary proceedings reveals that there was clear and convincing evidence to support the above findings by the referee.

The complaint also alleges that Mussman's actions in the transfer violated canon 7, disciplinary rule 7-102(A)(7) which provides that a lawyer shall not '(c)ounsel or assist his client in conduct that the lawyer knows to be illegal or fraudulent.' It is also charged that his conduct violated cannon 1, disciplinary rule 1-102(A)(4) which provides that a lawyer shall not engage in conduct involving fraud. The trial court, as hereinbefore stated, found the transfer to be fraudulent and this court sustained the finding as warranted. Stephenson v. Stephenson supra. At the disciplinary hearing Mussman testified that the idea of the transfer was first brought up by his client who came to him and said: 'I got an idea . . . why don't I set up a development corporation, develop the property.' At the hearing on a temporary injunction Mussman stated to the court: 'I came upon the idea that maybe we could form a corporation . . . subdivide the property . . . sell lots . . . and give Mr. Stephenson a job. . . . So we went ahead and formed a corporation.' Mr. Stephenson at the hearing on the Merits before the trial court said the transfer was 'our idea' 'Mr. Mussman and myself.' On all the evidence before him the referee was warranted in finding that Mussman counseled or assisted his client in conduct that he (Mussman) knew or should have known to be...