LEO: Attorney/Client Relationship, LE Op. 744


Attorney/Client Relationship Substitution of Trustee.


April 17, 1986


Attorney A represented buyer and seller in a real estate transaction in which seller took back a second deed of trust under which Attorney A was designated trustee. The deed of trust did not provide for substitution of trustee. Seller sold/assigned the note secured by the second deed of trust to bondholder, who, upon default, instructed Attorney A to foreclose under the deed of trust and Attorney A refused. Bondholder then brought a court proceeding for the substitution of trustee and Attorney B represented Attorney A and buyer in the proceeding. The substitute trustee initiated foreclosure proceedings under the deed of trust and Attorney A advised buyer to take legal action to stop foreclosure and referred buyer to Attorney B. Attorney B stopped the foreclosure proceeding by representing buyer in filing of a bankruptcy petition. Subsequently, Attorney A and B became members of the same law firm.


Based on the above fact situation, the committee concluded that (1) Attorney A properly refused to initiate foreclosure because to do so would have violated the attorney/client relationship which existed between Attorney A and buyer by reason of the simultaneous representation by Attorney A of buyer and seller in the underlying transaction; (2) Attorney A did not act in compliance with DR:5-105(D) and (E) in advising buyer to take legal action to stop the foreclosure because of the attorney/client relationship between Attorney A and seller; (3) while Attorney A had a fiduciary responsibility to the bondholder as the purchaser of the note secured by the deed of trust from Attorney A's client/seller, there was no attorney/client relationship between Attorney A and bondholder and, subsequently, there was no violation of the Code of Professional Responsibility; and (4) Attorney B did not conduct himself in compliance with the Code of Professional Responsibility by continuing the representation of buyer in bankruptcy after Attorney B joined Attorney A in the same law firm. [DR:5-105(D) and (E)]


Committee Opinion April 17, 1986


LEO: Attorney/Client Relationship -, LE Op. 744 (1986)