Legal Ethics Opinion No. 1390

Domestic Relations--Acquiring Proprietary Interest In Litigation: 
Attorney Taking Deed of Trust on Marital Home to Secure Note for
Legal Fees  

You have advised that, in a divorce action, a Final Decree has
been entered which properly reserves jurisdiction in the court to
distribute the marital property at a future hearing.  Further,
you indicate that, prior to the hearing, the attorney for one of
the parties is granted a deed of trust by his client on the
marital home to secure a promissory note made by the client for
the attorney's fees.  The marital home is currently held by the
ex-spouses as tenants in common,  the parties' respective
equitable interests in the home are disputed, and you indicate
that, if the court were to transfer title to the property to the
non-encumbering spouse, the attorney could then foreclose on the
property, assuring that legal fees were paid out of the marital
estate and not by the client.  You point out that the interest
granted is, at the time of the conveyance to the attorney,
indeterminate and the subject matter of the litigation.

You have asked that the committee opine as to the propriety of
the attorney acquiring an interest in the marital home which
interest is to be determined at the equitable distribution

The appropriate and controlling disciplinary rule to the issue
you raise is DR 5-l03(A) which precludes a lawyer from acquiring
a proprietary interest in the cause of action or subject matter
of litigation he is conducting for a client, except that the
lawyer may acquire a statutory lien to secure his fee or expenses
and may contract with the client for a reasonable contingent fee
in a civil case.

In addition, Disciplinary Rule 2-l05 outlines permissible
contingent fee procedures and Ethical Consideration 2-22
indicates that contingent fee arrangements are rarely justified
in domestic relations cases.  Further guidance is contained in EC
5-7 which cautions that the exercise of a lawyer's independent
judgment may be adversely affected when the lawyer has acquired a
proprietary interest in the cause of his client or is otherwise
financially interested in the outcome of the litigation. 
Disciplinary Rule 5-l04(A) similarly precludes a lawyer from
entering into a business transaction with a client if they have
differing interests therein and if the client expects the lawyer
to exercise his professional judgment for the protection of the
client.  Such a transaction may be proper, however, if the client
has consented after full and adequate disclosure and provided
that the transaction was not unconscionable, unfair or
inequitable when made.

The committee has earlier opined that loans made by an attorney
to his clients constituted a business transaction that would
allow the lawyer's professional judgment to be affected by his
own financial interest and, furthermore, would create an improper
adverse relationship between the lawyer as creditor and client as
debtor.  LEO #l269; see also LEO #l2l9. 

Under the facts you have presented, the committee is of the
opinion that the acquisition by the attorney of an interest in
the marital home, the amount of which interest is to be
determined at the equitable distribution hearing, would give the
lawyer a proprietary interest in the divorce action and
inappropriately interject the lawyer's interests into the issues
of the case.   Thus, the committee is of the view that such a
transaction would create an unacceptable risk on the lawyer's
independent judgment on behalf of his client, and an improper
adverse relationship between the client/borrower and the
lawyer/lender, which may not be cured by the client's consent. 
Maine Ethics Opinion 97 (May 3, l989).

Committee Opinion
March 12, 1991