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Opinion #38 - 12/06/1966 (6-66)

Topic: Conflict of Interest, Representation of Adverse Parties

Digest: Lawyer may not represent both buyer and seller of real estate where there is a clear instance of conflicting interests

Canon: Former Canon 6

QUESTION

Is it ethically proper for a lawyer who represents a party to a real estate transaction to undertake also the representation of an adverse party, assuming such representation would ordinarily involve merely computing the adjustments and preparing the deed, or where title insurance is not used, the preparation also of a title abstract?  Would the answer be different if a subdivision were involved in which an access road is required to be built but there is no agreement as to who is to build the road?

OPINION

Canon 6 of the canons of Professional Ethics provides as follows:

"6. Adverse Influences and Conflicting Interests

"It is the duty of a lawyer at the time of retainer to disclose to the client all the circumstances of his relations to the parties, and any interest in or connection with the controversy, which might influence the client in the selection of counsel.

"It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts.  Within the meaning of this canon, a lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose.

"The obligation to represent the client with undivided fidelity and not to divulge his secrets or confidences forbids also the subsequent acceptance of retainers or employment from others in matters adversely affecting any interest of the client with respect to which confidence has been reposed.

Dual representation should be practiced sparingly and only when it is clear that neither party will suffer any disadvantage from it. It is difficult to justify, except in unusual and very limited circumstances, and only after complete disclosure and consent, with a clear understanding by both parties of its possible effect on their respective interests.  [Legal Ethics by Henry s. Drinker, page 104 (1954), Legal Ethics by Raymond L. Wise, page 141 (1966).]  The lawyer who represents conflicting interests acts at his peril and should realize that the thrust of Canon 6 is to discourage acceptance of such representation.

The attorney has the affirmative duty to be certain that the clients have the capability and actually do fully understand the conflicts that may arise and the peculiar position dual representation may cause them to be placed in.

In real estate transactions it is not always true, even in relatively simple ones, that representation of both buyer and seller involves nothing but computations of adjustments and preparation of the deed. 

A number of questions arise that require the exercise of legal judgment.   Examples are (i) whether the deed should be full covenant and warranty, bargain and sale, with or without covenants, or quiteclaim, (ii) what customs are to be followed in making adjustments, (iii) which points disclosed in the title report are important and which may be disregarded, (iv) what title company to use, considering the fact that a title company reinsuring may perpetuate past errors which another title company would pick up.

The inquiry makes special reference to the necessity of having an access road to the property being transferred. This will involve negotiations in which dual representation is virtually impossible.

In Informal Opinion No. 886-9/28/65 the Committee on Professional Ethics of the American Bar Association passing upon the propriety of dual representation in a real estate development said "we suggest that the attorney for the developer would be ill-advised to in any way represent the buyers."

One authority says, "The prudent lawyer would be wise never to put himself in a position of representing conflicting interests "Legal Ethics by Raymond L. Wise, page 141 (1966).