October 25, 2001
A judge whose spouse holds a mortgage on property owned by a corporation
should recuse himself or herself in any case where there is an appearance
by an attorney who is a shareholder of the corporation, subject to remittal
22 NYCRR 100.4(D)(1);
100.3(E)(1), (2); 100.3(F).
A judge inquires concerning the ethical implications of a proposed sale of commercial property now owned by the judge and the judge's spouse. The building in question is currently occupied by three attorneys, two of whom appear in the court in which the judge presides. The proposal is for the judge and the judge's spouse to sell the building to a close corporation controlled by the three attorneys, for a price of $150,000, consisting of a $30,000 down payment, plus a purchase money mortgage in the amount of $120,000 to be held by the judge's spouse. The inquiry specifies that the mortgage debt is payable at an interest rate of 7½ percent per year, to be amortized over 30 years, but callable after 10 years.
Section 100.4(D)(1) of the Rules Governing Judicial Conduct states that a judge shall not engage in financial dealings which "involve the judge in . . . continuing business relationships with those lawyers . . . likely to come before the court on which the judge serves." 22 NYCRR 100.4(D)(1). Accordingly, the Committee has previously stated that it is improper for a judge to lease commercial property to lawyers who appear before the judge's court. Opinions 95-104 (Vol. XIII); 93-91 (Vol. XI). The Committee has also stated that recusal is required where a lawyer appearing before the judge holds a mortgage on property owned by the judge. Opinion 95-104 (Vol. XIII).
Here, the mortgage loan in the principal sum of $120,000 is to be conveyed to the judge's spouse, and thus the judge would not become personally involved in a "continuing business relationship" with any of the attorneys noted above, or with the corporation they intend to form. Nonetheless, the Committee believes that the debtor-creditor relationship between the corporation and the judge's spouse might reasonably call the judge's impartiality into question in any case in which there is an appearance by an attorney who is a shareholder in such corporation. 22 NYCRR 100.3(E)(1). This view is reinforced by section 100.3(E)(2) of the Rules which requires a judge to "make a reasonable effort to keep informed about the personal economic interests of the judge's spouse . . .," thus confirming that a spouse's economic interests might give rise to an occasion for disqualification. It therefore follows that recusal is required in such cases, subject to the remittal of disqualification provisions set forth in 22 NYCRR 100.3(F).