May a closing lawyer tell counsel for the mortgagee and title insurer what the lawyer and owner said about the owner's affidavit?

Plain-English summary

The inquiry described a loan closing at which one attorney represented both the owner-borrower and the mortgagee-lender. The owner signed the usual owner's affidavit certifying that no third parties had mechanics' lien rights. A contractor later asserted a mechanics' lien that, through relation back, might be superior to the mortgagee's deed of trust, and litigation followed. The mortgagee and title insurer employed counsel, who asked the closing attorney what the attorney had told the owner about the affidavit, and what the owner had said.

The opinion concluded that the attorney could disclose both the nature and extent of what the attorney told the owner about the affidavit and what the owner told the attorney, citing Rule 4(c)(5). It further concluded that the answer would be no different if the attorney were asked the same questions in a deposition taken in connection with the litigation.

Currency note

This opinion was issued in 1991, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The confidentiality provision it applies (Rule 4(c)(5)) has since been renumbered and revised. 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 Treat this page as historical context, not current guidance.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: May closing counsel disclose conversations about the owner's affidavit to counsel for the mortgagee and title insurer?

A: Yes. The opinion answered the specific disclosure questions with 'Yes. Rule 4(c)(5)' and did not attribute the result to joint representation.

Q: Could the lawyer disclose both sides of the conversation, what the lawyer said and what the client said?

A: Yes. The opinion answered yes both as to what the attorney told the owner and as to what the owner told the attorney.

Q: Does it matter whether the lawyer is asked informally or under oath in a deposition?

A: No. The opinion concluded the answer would be no different if the attorney were asked the questions in a deposition taken in connection with the litigation.

Background and rules framework

The opinion applied North Carolina Rule 4(c)(5), a confidentiality exception within the rule corresponding to Model Rule 1.6. The closing lawyer represented the owner and mortgagee. The opinion gave only 'Yes. Rule 4(c)(5)' for disclosure to counsel employed by the mortgagee and title insurer; it did not explain the result by joint representation.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 4(c)(5) (confidentiality; disclosure exception)
• MR 1.6 (confidentiality of information)

See also

• NC Ethics Op. RPC 144: conflict in joint representation
• NC Ethics Op. RPC 153: termination of joint representation and the former client's right to the file

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-113/

Original opinion text

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

Inquiry #1:

A lender (Mortgagee) loaned money to an owner (Owner). The note evidencing the loan was to be secured by a first lien deed of trust on certain real property that had been owned by the Owner for some period of time prior to the closing of the loan. An attorney (Attorney) represented both the Owner and the Mortgagee at the closing of the loan. The Mortgagee required, and instructed the Attorney, that, as a condition to the closing of the loan, a mortgagee's title insurance policy be obtained by the Attorney with respect to Mortgagee's first lien deed of trust. The title insurance company, as a condition to issuing the title insurance policy, required the usual owner's affidavit with respect to mechanics' lien.

During the course of the closing of the loan, the Owner executed the usual owner's affidavit running in favor of the title insurance company in which the Owner "certified" that no third parties had any rights to any "mechanics' lien" on the real property.

Subsequent developments indicate that, in fact, at least one third party had "mechanics' lien" rights which, because of the relation back to the commencement of the work on the Owner's real property, may be superior to the lien of the deed of trust in favor of the Mortgagee.

Litigation has now been commenced against the Mortgagee and the Owner by the contractor who claims a mechanics' lien superior to the rights of the Mortgagee in the subject real property. The Mortgagee and the title insurance company have employed counsel (Counsel), other than Attorney, and the Owner has advised Counsel that the Owner did not realize that he was signing an affidavit certifying that there were no mechanics' lien rights superior to that of the deed of trust. Counsel for the Mortgagee and title insurance company has inquired of Attorney what Attorney told the Owner about the affidavit before it was executed by the Owner.

Based on the foregoing:

Can Attorney advise Counsel as to the nature and extent of his conversation to Owner at the closing with respect to the affidavit?

Opinion #1:

Yes. Rule 4(c)(5).

Inquiry #2:

Can Attorney advise Counsel as to the nature and extent of Owner's conversation to Attorney at closing with respect to the affidavit?

Opinion #2:

Yes. See the answer to question #1.

Inquiry #3:

Would the answers to 1 and 2 be any different if Attorney was asked the questions in a deposition taken in connection with the litigation?

Opinion #3:

No.