If a foreclosure becomes contested, can the attorney-trustee resign, have the lender appoint a substitute trustee, and then represent the lender in the foreclosure?

Plain-English summary

An attorney regularly certified title to a lender for loans he closed and that were secured by deeds of trust naming him as trustee; his closing and title-certification fee was paid by the lender but borne by the borrower as a loan expense. Under G.S. Section 45-10(b), the deeds of trust gave the lender the right to remove the trustee and appoint a substitute at any time. The inquiry asked whether, upon learning the hearing before the Clerk would be adversary within the meaning of CPR 137, the attorney-trustee could resign, have the lender appoint a substitute trustee, and then represent the lender in all further foreclosure proceedings.

The opinion concluded yes, if the attorney does not have some duty to the borrower, arising out of the loan or the loan closing, that would make it improper for the attorney to take a position adverse to the borrower.

Currency note

This opinion was issued in 1978 under North Carolina's former Code of Professional Responsibility (the DR/EC framework), before the State Bar replaced the Code with the Rules of Professional Conduct (adopted 1985) and before the 2003 revisions to those Rules. The conflict-of-interest principle it applied corresponds to today's Model Rule 1.7. Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can the attorney-trustee represent the lender after the foreclosure becomes contested?

A: Only after resigning. The opinion concluded that once the attorney resigns and the lender appoints a substitute trustee, he may represent the lender, subject to a condition.

Q: What is the condition on representing the lender?

A: The opinion concluded the attorney may do so only if he has no duty to the borrower, arising from the loan or closing, that would make taking a position adverse to the borrower improper.

Background and rules framework

The opinion applied the conflict-of-interest principle of the former Code (corresponding to today's Model Rule 1.7) to a deed of trust that permitted the lender to substitute the trustee under G.S. Section 45-10(b). The analysis turned on whether the attorney owed the borrower a duty from the closing that would bar adverse representation after he resigned the trusteeship.

Citations and references

Rules of Professional Conduct:

• North Carolina Code of Professional Responsibility (conflict of interest)
• MR 1.7 (conflicts of interest)

Statutes:

• G.S. Section 45-10(b) (substitution of trustees, as cited in the opinion)

Other opinions cited:

• North Carolina CPR 137

See also

• NC Ethics Op. CPR 166: foreclosure trustee must stay neutral
• NC Ethics Op. CPR 94: lawyer-trustee representing the bank

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/cpr-201/

Original opinion text

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

Inquiry:

An attorney regularly certifies title to a lender in connection with loans which the attorney closes for the lender and which are secured by deeds of trust in which the attorney is named as trustee. The attorney's fee for the closing and title certification is paid by the lender but borne by the borrower as an expense of the loan transaction. The deeds of trust, pursuant to GS Sec. 45-10 (b), give the lender the right to remove the trustee and to appoint a substitute trustee at any time.

If, upon learning that the hearing before the Clerk will be adversary within the meaning of CPR 137, the attorney-trustee resigns as trustee and the lender appoints a substitute trustee, may the attorney then ethically represent the lender in all further proceedings to foreclose the deed of trust?

Opinion:

Yes, if the attorney does not have some duty to the borrower arising out of the loan or loan closing which would make it improper for such attorney to take a position adverse to the borrower.