Can a lawyer who is the trustee under a deed of trust represent one of the parties in a partition proceeding that involves the lender and the trustee?

Plain-English summary

Attorney A represented H, who was divorced from W. Before the divorce, H and W had taken a loan from Bank B secured by a deed of trust, and Attorney A was the trustee. The question was whether Attorney A could now represent H in a partition proceeding that would necessarily involve both Bank B and Attorney A in his role as trustee.

The opinion concluded no, unless Attorney A resigns as trustee. Drawing on prior opinions, it restated that the trustee is a fiduciary charged with representing the interests of both lender and borrower, and therefore cannot both be a party in his fiduciary capacity as trustee and represent one of the adversaries in the same proceeding, whether a foreclosure, an appeal from a foreclosure, or a suit to recover damages or enjoin foreclosure. The conflict between his roles as trustee and as attorney for H would bar his doing both, but resigning as trustee would remove the bar and let him represent H.

Currency note

This opinion was issued in 1981 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 principles it applied correspond 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 Treat this page as historical context, not current guidance.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 a deed-of-trust trustee represent a party in litigation involving the lender?

A: Not while serving as trustee. The opinion concluded the lawyer-trustee cannot both be a party in his fiduciary capacity and represent one of the adversaries in the same proceeding.

Q: Why does the dual role create a conflict?

A: Per the opinion, the trustee is a fiduciary charged with representing the interests of both lender and borrower, so advocating for one side is incompatible with that neutral duty.

Q: Can the lawyer cure the conflict?

A: Yes. The opinion concluded that if Attorney A resigns as trustee, he may represent H in the partition proceeding.

Background and rules framework

The opinion applied the conflict-of-interest principles of the former Code of Professional Responsibility, which correspond to today's Model Rule 1.7, building on the trustee-neutrality line of CPRs 264, 166, and 94. The analysis turned on the incompatibility of the trustee's fiduciary duty to both lender and borrower with partisan advocacy for one of them.

Citations and references

Rules of Professional Conduct:

• North Carolina Code of Professional Responsibility (conflicting interests; trustee impartiality)
• MR 1.7 (conflicts of interest)

Other opinions cited:

• North Carolina CPR 264, CPR 166, and CPR 94 (trustee may not advocate for either side in a foreclosure)

See also

• NC Ethics Op. CPR 166: foreclosure trustee must remain neutral
• NC Ethics Op. CPR 94: lawyer-trustee representing the bank in a contested foreclosure
• NC Ethics Op. CPR 201: resigned trustee representing the lender in a contested foreclosure

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/cpr-297/

Original opinion text

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

Attorney A represents H, who is divorced from W. Prior to the divorce in which Attorney A represented H, H and W had obtained a loan from Bank B. The loan was secured by a deed of trust, Attorney A is the trustee.

May Attorney A now represent H in a partition proceeding which would of necessity involve Bank B and Attorney A as trustee?

Opinion:

No, unless Attorney A resigns as trustee. In prior opinions, the rule has been established that the trustee is a fiduciary charged with representing the interests of both lender and borrower. As such, he cannot both be a party in his fiduciary capacity as trustee and represent one of the adversaries in the same proceeding, whether it be a foreclosure proceeding, an appeal from a foreclosure proceeding, or a suit to recover damages or enjoin foreclosure. See, e.g., CPR's 264, 166, 94. The conflict or potential conflict between his roles as trustee and as attorney for H would prevent his both representing H and acting as trustee in the partition proceeding, but would not prevent his representing H if he resigned as trustee.