LEO: Conflict of Interest - Attorney as LE Op

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

DR:5-105(D).

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

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