S & S Hotel Ventures Ltd. Partnership v. 777 S. H. Corp. , 505 N.Y.S.2d 875 ( 1986 )

— Order of Supreme Court, New York County (Helen E. Freedman, J.), entered'November 13, 1985, which disqualified the law firm of Bell, Kalnick, Beckman, Klee & Green from acting as plaintiff’s trial counsel, is affirmed for the reasons stated by Special Term, without costs.

As conceded in the dissent, "Special Term’s determination correctly applied the principles that have been adopted in this area of the law by this court and other Appellate Divisions”.

The facts of the underlying action are fully set forth in both the opinion of Special Term and the dissent. A review of the record discloses that Herman Sassower (who serves as counsel to the Bell, Kalnick firm sought to be disqualified) was the sole general partner of plaintiff, while also acting as its attorney together with Stephen Seldin of the Bell, Kalnick firm, at the time the loan agreement in issue was originally negotiated, and that he played an active and significant role not only in the drafting of that agreement but in the subsequent events regarding the proposed transfers of the hotel property covered by the agreement.

While defendant claims that both Herman Sassower and Stephen Seldin "ought to be called as witnesses” in this case, it is clear that it is Herman’s involvement that is the focal point of the controversy. Defendant’s papers are replete with instances of Herman Sassower’s intimate involvement with both the negotiation of the agreement and the subsequent events surrounding its interpretation, particularly in connection with obtaining defendant’s required consent to the proposed transfers of the hotel property and the "reasonableness” of defendant’s withholding of that consent. It is asserted that the reasonableness or unreasonableness of defendant’s conduct in that regard is directly dependent upon whether plaintiff timely and adequately supplied defendant with the information to which it was entitled regarding the proposed transferee. Defendant claims that it was Herman Sassower, at that time an officer of plaintiff’s corporate general partner as well as plaintiff’s attorney, who played the critical role in controlling the flow of that information.

It is clear that Herman Sassower’s extensive personal involvement and knowledge of the facts here involved are far removed from the matters of formality to which an attorney-witness is ordinarily permitted to testify (Code of Professional Responsibility, DR 5-101 [B] [2]) and go to the core of the controversy. Indeed, the dissent itself acknowledges that Herman "has material information relevant to plaintiff’s theory of liability” relative to a critical statement made in his presence which indicates that he "ought to be called” as a witness. Moreover, defendant asserts that if plaintiff does not call Herman Sassower on its case, defendant intends to do so.

Where, as here, the facts compel the conclusion that the attorney "ought to be called as a witness”, disqualification of the firm with which he is associated is required even if the party whom he represents may not intend to call him as a witness, and even if the opposing party’s stated intention to do so does not come to pass. (See, MacArthur v Bank of New York, 524 F Supp 1205 [SDNY]; Hempstead Bank v Reliance Mtge. Corp., 81 AD2d 906; North Shore Neurosurgical Group v Leivy, 72 AD2d 598; Grossman v Commercial Capital Corp., 59 AD2d 850; Gasoline Expwy v Sun Oil Co., 64 AD2d 647; 1776 Assoc. v Lazrus, 99 Misc 2d 370.)

The dissent’s reliance upon its factual determination of lack of prejudice to either party in this case as a predominating factor for denying the disqualification of the Bell, Kalnick law firm is misplaced. The rationale for disqualification in a case where a party’s attorney will or ought to be called as a witness was cogently set forth by this court in Tru-Bite Labs v Ashman (54 AD2d 345, 347) as follows: "An advocate who becomes a witness is in the unseemingly and ineffective position of arguing his credibility since the functions of an advocate and a witness are inconsistent. Conversely, the opposing counsel may be handicapped in challenging the credibility of the lawyer when he also appears as a witness for his client. Where the question arises, doubts should be resolved in favor of the lawyer testifying and against his continuing as an advocate (see Ethical Consideration EC 5-10 of the Lawyer’s Code of Professional Responsibility as approved by the American Bar Association and adopted by the New York State Bar Association, effective January 1, 1970).”

While many of the arguments put forth by those who favor changing the present rules governing disqualification of counsel are highly meritorious and certainly more compatible with contemporary realities, we cannot ignore the fact that American Bar Association Model Rule of Professional Conduct 3.7, which would permit the result here urged by the dissent, has failed of enactment in this State. While it is to be hoped that serious reconsideration will be given to the advisability of revising the current rule which, despite its commendable purposes, frequently evokes serious disquietude by reason of its unfortunate and ofttimes draconian impingement upon the cherished right to freely select the counsel of one’s choice, that rule nevertheless remains controlling and applicable to the instant litigation. The Justice at Special Term, exercising sensitivity and restraint within the parameters of that rule, struck an appropriate balance here in finding that disqualification of plaintiff’s counsel’s law firm is required but only as to the trial itself. Concur — Murphy, P. J., Fein and Ellerin, JJ.