Can a lawyer hired by a bank to examine a title certify responsibility to both the bank and the borrower paying for the examination?

Plain-English summary

The committee considered whether an attorney a bank hires to examine a title may sign a dual certification acknowledging responsibility to both the bank and the customer requesting and financing the examination, and answered yes. It started from Canon 5's requirement that a lawyer exercise independent professional judgment, which precludes representing two parties with conflicting interests in the same matter, while noting that EC 5-1 (judgment exercised solely for the client, free from compromising influences) and EC 5-19 (a lawyer may represent several clients whose interests are not actually or potentially differing, but should explain anything that might cause a client to question undivided loyalty and must defer to a client who believes otherwise) guide non-litigation matters.

The committee reasoned that a breach of the duty of independent judgment requires that the parties' interests in fact conflict. Citing Kentucky case law (In re Advisory Opinion of Kentucky Bar Association, 361 S.W.2d 111 (Ky. 1962), and 526 S.W.2d 306 (Ky. 1974)), which defined conflicting interests as those where the lawyer's duty to one client requires contending for what duty to another requires him to oppose, and noting those cases arose from litigation, the committee found the interests of the bank and the consumer here to be in unison, with no potential conflict under Kentucky Bar Association v. Roberts, 579 S.W.2d 107 (Ky. 1979). In a real-estate title examination the parties employ the attorney not as an advocate but as an investigator, to examine the records and report clouds, defects, liens, easements, mortgages, or other encumbrances. Whether the requesting party is the buyer, the seller, or the bank, the primary interest of all is the status of the property, which is what the attorney is engaged to determine; so the interests of those to whom the attorney is professionally responsible are not in conflict. The committee distinguished the attorney's legal duty to exercise due care from the ethical duty not to represent parties with conflicting interests, observing that a breach of one would not necessarily breach the other, and confined its opinion to the ethical question within the committee's province.

Currency note

This opinion was issued in 1979 under Kentucky's former Code of Professional Responsibility (in effect 1971 to 1990), before the Kentucky Bar Association's 1990 adoption of the Rules of Professional Conduct (SCR 3.130) and the substantial 2009 revisions to those rules. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a bank's title-examination lawyer certify responsibility to the borrower too?

A: Yes, under this opinion. The committee found the bank's and the customer's interests in the title to be in unison, so there was no conflict barring a dual certification.

Q: Why is a title examination treated differently from litigation?

A: The committee said that in a title exam the lawyer acts as an investigator, not an advocate, and the parties' shared primary interest is the status of the property, unlike the adversarial posture of litigation.

Q: When would such dual responsibility become improper?

A: The committee's reasoning turned on the absence of an actual conflict; under EC 5-19 the lawyer should explain anything that might cause a client to question undivided loyalty and must defer to a client who believes a conflict exists.

Background and rules framework

The opinion applies Canon 5 and EC 5-1 and EC 5-19 of the former Code, which govern a lawyer's independent judgment and the representation of multiple clients whose interests do not differ, as construed by Kentucky's highest court. The modern analog is Model Rule 1.7 (concurrent conflicts of interest), which permits representation of multiple clients where there is no directly adverse or materially limiting conflict, subject to informed consent where required.

Citations and references

Rules of Professional Conduct:

• Canon 5, EC 5-1, EC 5-19 (independent judgment and multiple clients); modern analog Model Rule 1.7

Cases:

• In re Advisory Opinion of Kentucky Bar Association, 361 S.W.2d 111 (Ky. 1962), definition of conflicting interests
• In re Advisory Opinion of Kentucky Bar Association, 526 S.W.2d 306 (Ky. 1974), reaffirming the conflict standard
• Kentucky Bar Association v. Roberts, 579 S.W.2d 107 (Ky. 1979)

See also

• KBA Ethics Op. E-217: Buying Estate Property; Property Fees
• KBA Ethics Op. E-212: Former Government Lawyer Conflicts

Source

• Landing page: https://kybar.org/For-Members/Rules-Ethics-Information/Ethics-Opinions
• Original PDF: https://kybar.org/Portals/0/Admin/Ethics%20Opinions/KBA_E-222.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

KENTUCKY BAR ASSOCIATION
Ethics Opinion KBA E-222
Issued: November 1979

This opinion was decided under the Code of Professional Responsibility, which was in effect from 1971 to 1990. Lawyers should consult the current version of the Rules of Professional Conduct and Comments, SCR 3.130 (available at http://www.kybar.org), before relying on this opinion.

Question:

Can an attorney employed by a bank to perform a title examination sign a dual certification acknowledging his responsibility to both the bank and the customer requesting and financing the examination?

Answer:

Yes.

References:

Canon 5; EC 5-1, 5-19; In re Advisory Opinion of Kentucky Bar Assn, 526 S.W.2d 306 (Ky. 1974); In re Advisory Opinion of Kentucky Bar Assn, 361 S.W.2d 111 (Ky 1962); Kentucky Bar Assn v. Roberts, 579 S.W.2d 107 (Ky 1979)
OPINION

Canon 5 of the ABA Code of Professional Responsibility sets the foundation for the ethical issue brought up by these facts. Pursuant to that Canon, a lawyer should exercise independent professional judgment on behalf of a client. This ethical duty of course, precludes an attorney from accepting employment for representation from two parties with conflicting interests in the same matter. The majority of ethical considerations drafted under this Canon deal with the representation of multiple clients in a litigation situation. However, EC 5-1 and EC 5-19 provide some guidance to the attorney involved in matters other than litigation.
EC 5-1 provides:
The professional judgment of a lawyer should be exercised, within the bounds of the law, solely for the benefit of his client and free from compromising influences and loyalties. Neither his personal interests, the interests of other clients, nor the desires of third persons should be permitted to dilute his loyalty to his client.
According to EC 5-19:
A lawyer may represent several clients whose interests are not actually or potentially differing. Nevertheless, he should explain any circumstances that might cause a client to question his undivided loyalty. Regardless of the belief of a lawyer that he may properly represent multiple clients, he must defer to a client who holds the contrary belief and withdraw from representation of that client.

In order for a lawyer to breach his ethical duty to exercise independent judgment in representing two parties in the same matter, it must be proven that the interests of those parties are in fact conflicting. The highest court of Kentucky has dealt with the issue of “conflict of interest” on several occasions. In In re Advisory Opinion of Kentucky Bar Assn, 361 S.W.2d 111 (Ky 1962), the court quoted Canon 6 of the Canons of Professional Ethics governing the practice of law in Kentucky, which states:
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.
The court went on to further state that within the meaning of Canon 6, “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.”
In In re Advisory Opinion of Kentucky Bar Assn, 526 S.W.2d 306 (Ky 1974), the court reaffirmed its previous decision on this issue. It should be noted that both of these cases have their factual footing in situations involving litigation.
It is the Committee’s feeling that the interest of the bank and the consumer are in unison; therefore, there is no possibility of a potential conflict of interest within Kentucky Bar Assn v. Roberts. 579 S.W.2d 107 (Ky 1979).
Unlike the interests of parties involved in litigation, which is the most adversarial of all legal situations, the interests of parties involved in a real estate transaction are much less likely to conflict. The parties in a real estate transaction employ the attorney not as an advocate, but as an investigator. They employ him to examine the records of a piece of property to determine whether there are any clouds or defects in the title and to check for any liens, easements, mortgages, or other encumbrances which affect the property.
Whether the party requesting the title examination is the buyer or seller of a piece of property, or the bank involved in the transaction, the primary interest of all the parties is the status of the property. This is what the attorney is employed to determine and report. Therefore, the interests of the party or parties to whom the attorney is professionally responsible are not in conflict.
In practicing law an attorney has the duty to fulfill legal and ethical duties. In the facts set forth, the attorney would have the legal duty to exercise due professional care in performing the title examination and the ethical duty not to represent or be employed by two parties if their interests conflict. However, the breach of one of these types of duties would not necessarily result in the breach of the other type.
Often the distinction between an ethical and legal duty is unclear and confused, and this situation could lend itself to such confusion. However, the focus of this opinion is on the attorney’s ethical duties, since these are the only issues within the province of the Ethics Committee.

Note to Reader
This ethics opinion has been formally adopted by the Board of Governors of the Kentucky Bar Association under the provisions of Kentucky Supreme Court Rule 3.530 (or its predecessor rule). The Rule provides that formal opinions are advisory only.