LEO: Conflict of Interest - Attorney as LE Op. 824
Conflict of Interest - Attorney as Trustee.
October 9, 1986
Subject: Problems arising when an attorney serves as counsel for the
maker of a note and subsequently as a trustee pursuant to the underlying
deed of trust.
Conclusions: To the extent that this opinion differs from LE Op. 359,
LE Op. 528, LE Op. 659 and LE Op. 679, those LE Ops. are vacated.
It is the opinion of the committee that under certain circumstances an
attorney may represent a borrower and, in addition, serve as trustee under
a deed of trust without first obtaining consent of the borrower. In
furtherance of the requirements imposed on the trustee by the lender, the
trustee who formerly represented the borrower may foreclose without first
obtaining the consent of the borrower. The circumstance which would allow
this is that circumstance when the attorney representing the borrower has
in no way advised or counseled with regard to any of the terms or
conditions contained in the note or deed of trust; and wherein the
attorney does not, after closing, continue a relationship with the
borrower which may, under DR:5-105(D), be deemed representation "in the
same or substantially related matter." In essence, if the only
relationship that the attorney has with the borrower is that of preparing
legal documents, the content or terms of which are agreed to between
borrower and lender, without advice of the attorney preparing the
documents, it is the opinion of the committee that the preparation of a
deed, note, or deed of trust, shall not prohibit that same
attorney/preparer from serving as trustee and subsequently foreclosing. In
order to meet the special circumstance, the attorney must have no further
relationship post-closing with the borrower which might bring into play
If the foregoing circumstances are met, then disclosure of the future
representation is required; however, consent of the buyer to initiate
foreclsure proceedings is not required.
Absent these special circumstances, LE Op. 359, LE Op. 528, LE Op.
659 and LE Op. 679 correctly state the opinion of the committee.
If an attorney or any member of his firm should have such relationship
with the lender so as to have been involved directly or indirectly in any
of the terms embodied in any of the instruments to be prepared, then that
attorney may not serve as trustee without both full disclosure and prior
consent of the buyer. In some instances, some lenders may require the
preparing attorney to serve as trustee. If such be the case, then the
attorney shall disclose such fact, as well as the duties of that attorney
to be named trustee to the buyer.
LE Op. 659 requires that consent be given after full disclosure in all
circumstances. This opinion suggests circumstances where there must be
full disclosure, but where consent is not required. LE Op. 659 does not
address when such consent is required.
LE Op. 679 opines that it is not improper for the attorney to obtain
written consent after full disclosure. This committee, however, opines
that after full disclosure written consent is not required. However, the
committee is of the opinion that if an attorney does not meet the specific
circumstances first addressed, then some type of written consent to be
obtained at closing might be appropriate.
If a written request is utilized, the written consent may be such as the
attorney deems under all circumstances to be sufficient. [ DR:5-105(D),
LE Op. 359, LE Op. 528, LE Op. 659 and LE Op. 679]
Committee Opinion October 9, 1986
See also LE Op. 1022, and LE Op. 1153.