Can one North Carolina lawyer represent both a lender and the trustee on a deed of trust when a borrower sues to enjoin the foreclosure?

Plain-English summary

A trustee on a deed of trust began a foreclosure at the lender's request after the borrower defaulted. The borrower then sued the lender for unfair debt collection practices and named the trustee as a party to enjoin the foreclosure. The lender asks one lawyer to represent both it and the trustee, and the trustee also wants that lawyer.

The opinion frames the question under Rule 1.7. A concurrent conflict exists when the representation of one client will be materially limited by the lawyer's responsibilities to another (Rule 1.7(a)(2)), but the lawyer may proceed despite the conflict if she reasonably believes she can provide competent and diligent representation to each client, the representation is not prohibited by law and does not involve one client asserting a claim against the other in the same proceeding, and each client gives informed consent (Rule 1.7(b)). The opinion cites Comment [29], which observes that because the lawyer must be impartial between commonly represented clients, multiple representation is improper when it is unlikely that impartiality can be maintained.

Applying that, the opinion concludes the lawyer may proceed with common representation if she can maintain her impartiality between the clients and the other Rule 1.7(b) conditions are met, keeping in mind that the trustee's role in a foreclosure is a neutral one. If she cannot represent both clients while preserving the trustee's neutrality, she cannot provide both with competent and diligent representation. The opinion distinguishes this from a lawyer who actually serves as the trustee: under RPC 46, RPC 82, and RPC 90, such a lawyer must remain neutral between lender and borrower and may not represent either party individually while initiating a foreclosure. Because this lawyer represents the trustee rather than serving in that neutral role, the common representation with the lender is not prohibited if Rule 1.7(b) is satisfied.

In practice

Under the North Carolina rule as it stood at the time of the opinion, the analysis turns on whether the lawyer can preserve the trustee's neutral role while also representing the lender. The opinion holds that joint representation is permitted only if the lawyer reasonably believes she can provide competent and diligent representation to each client, the representation does not pit one client against the other in the same proceeding, and each client gives informed consent.

Per the opinion, representing a trustee is different from serving as the trustee. A lawyer who is the trustee is bound by RPC 46, RPC 82, and RPC 90 to stay neutral and may not represent either party; a lawyer representing the trustee may proceed jointly with the lender if impartiality between the represented clients can be maintained.

Common questions

Q: Can one lawyer represent both the lender and the deed-of-trust trustee in foreclosure litigation?

A: Yes, if the conditions of Rule 1.7(b) are met and the lawyer can maintain impartiality between the two clients. The opinion treats the trustee's role as a neutral one that the lawyer must preserve.

Q: What makes this a concurrent conflict in the first place?

A: Under Rule 1.7(a)(2), a concurrent conflict exists when the representation of one client would be materially limited by the lawyer's responsibilities to another. The opinion analyzes the joint representation through that lens before reaching Rule 1.7(b).

Q: How is this different from a lawyer who serves as the trustee?

A: A lawyer who actually serves as trustee must be neutral between lender and borrower and, under RPC 46, RPC 82, and RPC 90, may not represent either party individually while initiating foreclosure. The opinion concludes those limits do not bar a lawyer who merely represents the trustee.

Q: What if the lawyer cannot keep the trustee neutral?

A: Then the opinion concludes she cannot satisfy Rule 1.7(b)'s requirement of competent and diligent representation to both clients, so she cannot undertake the common representation.

Background and rules framework

The opinion interprets Rule 1.7 (concurrent conflicts of interest, corresponding to Model Rule 1.7), including Rule 1.7(a)(2) (material-limitation conflicts), Rule 1.7(b) (the conditions for proceeding despite a conflict), and Comment [29] (impartiality between commonly represented clients). It distinguishes the lawyer-as-trustee line of North Carolina opinions, RPC 46, RPC 82, and RPC 90.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NC Rule 1.7(a), 1.7(b) (concurrent conflicts; conditions for joint representation), cmt. [29]

Other opinions cited:

• NC RPC 46, RPC 82, RPC 90: a lawyer serving as foreclosure trustee must be neutral and may not represent either party individually.

See also

• NC State Bar 2013 FEO 5: Disclosing Confidential Information to a Lawyer Serving as Foreclosure Trustee
• NC State Bar 2008 FEO 11: Foreclosure Trustee Representing the Beneficiary on Other Matters
• NC State Bar 2011 FEO 5: Representing a Lender When the Corporate Trustee Is Owned by Spouse
• ABA Formal Op. 08-450: Confidentiality With Multiple Clients in the Same Matter

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/2004-formal-ethics-opinion-3/

Original opinion text

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

Inquiry:

Mr. Doe is the trustee on a deed of trust securing a loan from Lender to Borrower. Lender notified Mr. Doe that Borrower was in default and asked Mr. Doe to initiate a foreclosure proceeding. Soon after the foreclosure was commenced, Borrower filed a lawsuit naming Lender as the defendant and alleging unfair debt collection practices. Mr. Doe is also named as a party to the proceeding in order to enjoin the foreclosure proceeding. Lender asks Attorney A to represent it in the lawsuit and would like Attorney A to also represent Mr. Doe. Mr. Doe wants to be represented by Attorney A.

May Attorney A represent both Lender and Mr. Doe in his capacity as trustee on the deed of trust?

Opinion:

A lawyer may not engage in common representation of multiple clients if the common representation involves a concurrent conflict of interest. Rule 1.7(a). A concurrent conflict of interest exists whenever the representation of one client will be materially limited by the lawyer's responsibilities to another client. Rule 1.7(a)(2). However, a lawyer may proceed with the representation, despite the concurrent conflict, if the lawyer reasonably believes that the lawyer will be able to provide competent and diligent representation to each affected client and the representation is not prohibited by law, does not involve the assertion of a claim by one client against another in the same proceeding, and each affected client gives informed consent. Rule 1.7(b).

Comment [29] to Rule 1.7 provides additional guidance on when common representation is appropriate. It observes, "because the lawyer is required to be impartial between commonly represented clients, representation of multiple clients is improper when it is unlikely that impartiality can be maintained."

Attorney A may proceed with the common representation of Lender and Mr. Doe if she concludes that she can maintain her impartiality as between the clients and the other conditions of Rule 1.7(b) are satisfied. In making this determination, she must remember that the trustee's role in a foreclosure is a neutral role. If Attorney A cannot represent both clients in a manner that will preserve Mr. Doe's neutrality (as trustee), then she cannot satisfy the condition requiring her to provide both clients with competent and diligent representation.

The situation described in this inquiry must be distinguished from the limitations placed upon a lawyer who is actually serving as the trustee on a deed of trust. There are a number of ethics opinions that hold that a lawyer who serves as a trustee must be neutral as between the interests of the lender and the interests of the borrower and may not, therefore, represent either party individually while initiating a foreclosure proceeding. See RPC 46, RPC 82, and RPC 90. Since Attorney A is providing legal representation to the trustee but is not herself serving in that neutral role, common representation with the lender is not prohibited if the conditions of Rule 1.7(b) can be satisfied.