Can a lawyer represent both the maker of a promissory note and the guarantors in a suit, relying on the maker's authorization without ever consulting the guarantors?

Plain-English summary

A, the maker of a note, retained the inquirer to defend a suit brought against A as maker and against Mrs. A and her parents, Mr. and Mrs. Y, as guarantors. A told the inquirer to file an answer and defend on behalf of all, and that A would pay all fees and any judgment against the guarantors. The inquirer did so without ever speaking with Mr. and Mrs. Y, who were of advanced years and whose health Mr. and Mrs. A were concerned about. Before trial, A died without assets and Mrs. A filed for bankruptcy. The inquirer then engaged a handwriting expert who determined that the guarantors' signatures were forgeries. When the inquirer applied to amend the answers to assert the forgery defense, the trial court directed him to withdraw from representing all parties. The inquirer asked whether he could have continued as attorney for the guarantors had he withdrawn for A's insolvent estate, and whether he was justified in representing Mr. and Mrs. Y on A's authorization despite never having spoken with them.

The Committee applied RPC 1.7. Under RPC 1.7(a), a lawyer may not represent a client whose interests are directly adverse to another client unless each client consents after full disclosure, and under RPC 1.7(b) a lawyer may not represent a client if the representation may be materially limited by responsibilities to another client or third person or by the lawyer's own interests, absent consent after full disclosure and consultation (and a public entity cannot consent). The Committee found that the conflicting interests of the guarantors and the maker should have been apparent from the outset. It held, more broadly, that a lawyer may not undertake to represent a client without that client's informed consent on the basis of purported authorization by another, except pursuant to the order of a competent tribunal, a proposition to which it could conceive no exceptions. Given the circumstances of A's insolvent estate and Mrs. A's bankruptcy, the Committee concluded that Mr. and Mrs. Y needed the immediate and effective assistance of independent counsel and that the inquirer could not represent them.

Currency note

This opinion was issued in 1985, before New Jersey's adoption of the 2004 revisions to the Rules of Professional Conduct. 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 lawyer represent guarantors based only on the note maker's instruction to do so?

A: No. The opinion held that a lawyer may not represent a client without that client's own informed consent on the basis of another person's purported authorization, except by order of a competent tribunal.

Q: Were the interests of the maker and guarantors in conflict?

A: Yes. The opinion stated that the conflicting interests of the note's maker and its alleged guarantors should have been apparent from the outset, implicating RPC 1.7.

Q: Could the lawyer continue for the guarantors after the maker became insolvent?

A: No. The opinion concluded that, given A's insolvent estate and Mrs. A's bankruptcy, the guarantors needed independent counsel and the inquirer could not represent them.

Background and rules framework

The opinion applies RPC 1.7(a) and (b), New Jersey's general conflict-of-interest rule governing directly adverse and materially limited representations, to a lawyer who undertook to defend guarantors on the note maker's instruction. It treats informed consent of each affected client as a precondition to multiple representation.

Citations and references

Rules of Professional Conduct:

• MR 1.7 / NJ RPC 1.7(a) (directly adverse representation; consent after full disclosure)
• MR 1.7 / NJ RPC 1.7(b) (materially limited representation; consent after full disclosure and consultation)

See also

• NJ ACPE Op. 561: Representing a Township and Its Zoning Board of Adjustment
• NJ ACPE Op. 616: Blanket Settlement Offers to Multiple Plaintiffs

Source

• Full text (Justia mirror): https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp556-1.html
• Issuing authority: New Jersey Supreme Court Advisory Committee on Professional Ethics, via the NJ Courts Supreme Court Committees page

Original opinion text

Reproduced from a full-text mirror of the official opinion for research purposes. The linked official source controls.

115 N.J.L.J. 601, May 23, 1985

OPINION 556

Conflict of Interest - Representing both Maker of Promissory Note and Individual Guarantors

A, the maker of a note, retained the inquirer to defend a suit brought against A as maker and Mrs. A and her parents, Mr. and Mrs. Y, as guarantors. A advised the inquirer that he was to file an Answer, and defend on behalf of all, and that A would pay all fees and any judgment which might be recovered against the guarantors. The inquirer did so without ever speaking with Mr. and Mrs. Y, who are described as being of advanced years, because Mr. and Mrs. A were concerned for their health.

Before the matter came to trial, A died without assets and Mrs. A filed for bankruptcy. The inquirer thereupon engaged a handwriting expert who determined that the signatures of the alleged guarantors, Mrs. A and Mr. and Mrs. Y were in fact forgeries. Upon an application to amend the Answers of Mrs. A and Mr. and Mrs. Y to assert the defense of forgery, the trial court directed the inquirer to withdraw from the representation of all parties.

We have simplified the factual situation to some extent for the sake of clarity, but all of the essential facts are set forth above. The inquirer asks two questions: Whether it would have been proper for him to continue as attorney of record for Mrs. A and Mr. and Mrs. Y if he were to have withdrawn as attorney for the insolvent estate of A; and, whether he was justified in representing the interests of Mr. and Mrs. Y on the basis of the authorization of A even though he had never spoken with Mr. and Mrs. Y.

RPC 1.7(a) forbids representation of a client whose interests are directly adverse to another client unless "... [2]each client consents after full disclosure of the circumstances ..."

Furthermore, the same Rule provides that:

(b) A lawyer shall not represent a client if the representation of that client may be materially limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless:

(2) the client consents after a full disclosure of the circumstances and consultation with the client, except that a public entity cannot consent to any such representation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common representation and the advantages and risks involved.

The conflicting interests of alleged guarantors and the maker of a promissory note should have been apparent from the outset. In any case, a lawyer may not undertake to represent a client without the informed consent of that client on the basis of purported authorization by another except, of course, pursuant to the Order of a competent tribunal. We can conceive of no exceptions to that proposition. In this case, the present circumstances of the estate of A and the insulation of Mrs. A by virtue of her bankruptcy leave Mr. and Mrs. Y in a position where the immediate and effective assistance of independent counsel is imperative, and it is clear that the inquirer cannot represent them.