UPON THE REQUEST OF A MEMBER OF THE SOUTH CAROLINA BAR, THE ETHICS ADVISORY COMMITTEE HAS RENDERED THIS OPINION ON THE ETHICAL PROPRIETY OF THE INQUIRER’S CONTEMPLATED CONDUCT. THIS COMMITTEE HAS NO DISCIPLINARY AUTHORITY. LAWYER DISCIPLINE IS ADMINISTERED SOLELY BY THE SOUTH CAROLINA SUPREME COURT THROUGH ITS COMMISSION ON LAWYER CONDUCT.
Ethics Advisory Opinion 90-22
An attorney has closed a mortgage.
Questions:
1. May this attorney later update the title for the lender, who is considering foreclosure?
2. May this attorney update the title and file a lis pendens?
3. May this attorney represent the lender in a foreclosure action upon the loan?
Summary:
To properly assess whether there is a conflict it would be necessary to determine who the lawyer represented at the closing. If the lawyer represented the borrower or all parties then the following would apply:
(1) There would be no conflict of interest in the lawyer updating the title as he would merely be reporting what is a matter of public record. Therefore, there would be no danger of using or revealing any confidences obtained during the prior representation, which is forbidden by Rule 1.9. Neither would there be a violation of loyalty to the former client as the lawyer would not be taking an adverse position to the former client. Rule 1.9.
(2) The lawyer may not file a lis pendens, unless the former client consents after consultation as this would necessitate taking a position adverse to a former client in a related or substantially related transaction. Rule 1.9. The reason for this is that the lawyer would have to interpret the loan documents for the lender to ascertain if there had been a breach by the borrower before a lis pendens could be properly filed.
(3) The lawyer may not handle the foreclosure for the lender for the same reasons enumerated above unless the former client consents after consultation.
Opinion:
Rule 1.9 (a) states: A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person's interest are materially adverse to the interest of the former client unless the former client consents after consultation. Rule 1.9 (a). The comments to Rule 1.9 state, "When a lawyer has been directly involved in a specific transaction subsequent representation of other clients with materially adverse interests is clearly prohibited." "Rule 1.9 concerns loyalty to the client in cases of serial representation; it's protections are for the benefit of the former clients." G. Hazard and W. Hodes, The Law of Lawyering: A Handbook on the Model Rules of Professional Conduct (1986) at 174.
"The concerns underlying this proscription are the potential for violation of the lawyers duty of loyalty, as well as the risks that confidential information gained in a prior representation will be used to the disadvantage of the former client." ABA/BNA Lawyers Manual on Professional Conduct, 51:202.
For the lawyer to update the title for the lender after he has represented the borrower in the closing would not violate the concerns intended to be protected by Rule 1.9 in that no confidences would be revealed or misused; nor would the lawyer be taking a position adverse to the former client. The lawyer would merely be reporting that which is already a matter of public record.
However, to file a lis pendens or to handle the foreclosure for the lender would be in direct contravention of Rule 1.9. To do either of these activities would be to take a position adverse to the former client as such activity would necessitate the interpretation of and the enforcement of the loan documents against the former client. It has already been stated that the foreclosure and the loan transaction are substantially related. (SC Bar Advisory Opinion 84-24 ((9/86)). Representing the client at a closing necessitates a review of the loan documents and advice to a client as to his responsibilities and liabilities thereunder. For a lawyer later to pursue the foreclosure against the client would be taking a position adverse to a former client in a substantially related matter and would also be a violation of loyalty.
The only way that the lawyer could handle the foreclosure or file a lis pendens would be to obtain the consent of the client after consultation. Rule 1.9 (a).
It is recommended that one also refer to the text of SC Bar Advisory Opinion 84-24 (9/86). (See Comment to Rule 1.9 - "Adverse Positions").