Wednesday, September 29, 2021

Inn Trouble

A father was suspended for three months and his son admonished by the New Jersey Supreme Court for, among other violations, representing both the buyer and seller in a real estate transaction that cratered in a spectacular fashion.

From the Disciplinary Review Board report and recommendation

These matters arise from a failed, 2011 transaction involving the purchase and sale of the Bird & Bottle Inn (the Inn), an historic bed and breakfast in Garrison, New York. The Inn featured a wine cellar with an award-winning wine collection; a pub; a restaurant; a party tent and patio area, and held a liquor license.

The property has a Wikipedia page noting that Samuel Warren established it in 1761 and that it was once owned by bandleader Skitch Henderson.

Buyer and seller

[Buyer] Jones testified that, prior to 2011, the firm, including [son] Aaron and [father] Stephen, had represented him in tax lien issues, collection matters, and the sale of one of his businesses to Jones’s associate, Sean Canavan.

Prior to 2011, Stephen and the firm also had represented Michael Margolies (Michael), in some unidentified matters, which generated approximately $200,000 in unpaid fees. [Seller] Elaine Margolies (Elaine) had never been a client of the firm, Stephen, or Aaron.

Jones has known Aaron since high school

Jones is a caterer and restaurateur, who owned Club House Caterers, Picnics Unlimited, and Sandwiches Unlimited Lunchbox. He related that Stephen had been his attorney since 1993, but from 2005 to 2010, Jones did not require Stephen’s legal services. Then, “out of the blue,” in July 2010, Stephen called Jones and requested that he make an appointment, as Stephen wanted to discuss something with him. Jones complied.

Stephen told Jones that he had a client who owned the Inn, which the client’s wife was operating. They were trying, without success, to sell the Inn. Stephen suggested that Jones take a “drive-by and see what [he] thought.”

The attorneys admitted that they had represented both buyer and seller. The extensive negotiations and drafting revisions are set out in the report.

But

The closing took place on October 18, 2011. It appears that Jones did not go to the property until the following day. Jones testified that, although, prior to October 18, 2011, the property was clean, pristine, gorgeous, and “just very, very nice,” on the day after closing, “the place was dingy, dirty,” and the carpets were matted with mud. The damage had been caused by Hurricane Irene, which also had washed out the tent area and ruined the wine cellar.  Jones described the wine cellar as “the prestige of the place.” He said: “[Y]ou’re not going to sell a prix fixed ninety-eight-dollar meal without a great wine cellar.”

Jones further discovered that two individuals, who were the Margolies’ domestic help, were living, rent-free, in the attic of the Inn.

Jones also learned some disturbing information during a meeting with an Inn employee, who explained to him that the Inn paid sales tax only on credit card sales, and not on cash or check sales. He also learned that he would be required to pay amounts the sellers owed to the food vendor and gas company, despite his belief that, when he took over the Inn, there would be no outstanding accounts payable.

On October 20, 2011, Jones returned to the Inn and inspected the wine cellar, which was now “filled with crap,” and discovered that the vintage wines were missing. Although the racks had been rebuilt, they were filled “with whatever they could put in the racks.” On that date, he sought to cancel the deal.

On October 22, 2011, Elaine declared Jones in default. The next day, Jones sent her what he described as the “shame-on-you” letter. He sent a copy of the letter to Stephen. Thus, Jones considered the deal to be dead on October 23, 2011.

A lawsuit led to a $120,000  payment by Jones, who incurred more than  $300,000 in legal fees. 

The bar complaint followed.

The suggestion that the attorneys had been mere scriveners for the sale was rejected.

Aaron agreed that he did not know “enough about anything” to give advice to either Jones or Michael. At his deposition in the civil case, Aaron testified that he believed that he had represented both parties, but again raised his mere “scrivener” defense, and included typing as one of his skills.

The board found that the senior attorney was more culpable than his relatively newly admitted son.

Although the case now before us involves egregious circumstances and serious economic harm, Stephen, not Aaron, was responsible for the outcome. Aaron, like Gilman, had been a member of the New Jersey bar for just three years and was an associate acting at the direction of a senior attorney. In this case, that senior attorney was Aaron’s father.

(Mike Frisch)

https://lawprofessors.typepad.com/legal_profession/2021/09/a-father-was-suspended-for-three-months-and-his-son-reprimanded-for-among-other-violations-representing-the-buyer-and-selle.html

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Comments

this seems a very small price for the lawyers to pay - what am I missing?

Posted by: LizRyan Cole | Sep 29, 2021 6:59:00 AM

Actually par for the New Jersey course

Posted by: Michael Frisch | Sep 29, 2021 12:53:46 PM

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