Supreme Court of New Jersey, 1990
120 N.J. 665, 577 A.2d 490
SYNOPSIS: On an order to show cause, the question before the court was whether to implement the recommendation of the Disciplinary Review Board (New Jersey) that respondent attorney be disciplined for his dual representation of a client as both attorney and real estate broker in the same transaction.
-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 agent filed an ethics complaint.
-After the Disciplinary Review Board (DRB) recommended discipline for respondent attorney's conduct, he challenged the decision.
-The court disagreed with the DRB holding that although a conflict of interest was created, discipline was not warranted in this case.
The court first held that because respondent did not hold a brokerage license under N.J. Stat. Ann. §§ 45:15-1 to -42, he was required to confine any broker's services performed to those that were ancillary, and subordinate to the legal services performed for his client.
-It followed, that respondent could not be independently compensated for his brokerage services, regardless of his intent to profit.
-Therefore, respondent acted improperly as an attorney and in a manner that reflected adversely on the legal profession under Model Code of Professional Responsibility, DR 1-102(A)(6).
-However, respondent acted in the good-faith belief that his conduct did not violate disciplinary standards because there were no relevant opinions and no clear legislative or regulatory mandate. -Under these circumstances, there was no reason grounded in the public's confidence in the legal profession to impose formal discipline.
CONCLUSION: The court did not impose the recommended discipline on respondent attorney. Although respondent created a conflict of interest by representing his client in the capacities of both attorney and real estate broker, the attorney had a good faith belief that his conduct was permitted, and therefore, in this instance, no discipline was warranted.
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