May a lawyer who arranged and closed a mortgage loan for a longtime client foreclose that mortgage for the lender against that same client?

Plain-English summary

Over several years, Attorney A had represented B in about three legal matters, the last a few years earlier. B later came to A's office asking whether A could obtain a mortgage loan for him, and A did so from C, a client of A's who was an individual investor rather than a lending institution. Nothing was expressly said about whether A represented B as an attorney or as a broker, and nothing was said about a possible conflict of interest. With the consent of both B and C, A prepared all the mortgage papers and closed the loan; B paid A all the legal expenses for the title search and the like under an agreement (a letter signed by C, addressed to and approved by B) providing that the title search and mortgage papers were to be prepared by "A, attorney, at your expense." B then defaulted, and C wanted to retain A to foreclose the mortgage against B. The question was whether A could properly do so.

The Committee observed that the facts did not show A had told his former client B that he was not acting for B but solely for C, the prospective mortgagee. It distinguished Hanson v. Janitschek, 57 N.J. Super. 418 (App. Div. 1959), rev'd on the dissent, 31 N.J. 545 (1960), where the opinion clearly stated the attorney had never previously represented or advised the Hansons in any capacity; here, by contrast, A had represented B in about three legal matters, so it was reasonable to assume B considered A his lawyer in the mortgage transaction.

Quoting its Opinion 6, the Committee said such conduct would tend to impair the confidence a client has the right to repose in his attorney and thus destroy an essential of the professional relationship, and that maintaining public confidence in the bar requires avoiding not only actual wrongdoing but even the appearance of wrongdoing. It concluded that it would be improper for A to foreclose C's mortgage against B.

Currency note

This opinion was issued in May 1966, before New Jersey's September 13, 1971 adoption of the Disciplinary Rules (Code of Professional Responsibility), and well before the 1984 Rules of Professional Conduct and all later revisions. It applied the duty-to-a-former-client and appearance-of-impropriety principles of the Canons, drawing on the Committee's Opinion 6. These subjects are now treated under RPC 1.9 (duties to former clients) and RPC 1.7 (concurrent conflicts), with the threshold question of who the client was bearing on both. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific requirement mentioned here.

Common questions

Q: Can a lawyer foreclose a mortgage against a borrower he had represented?

A: On these facts, no. The Committee held it improper for the attorney to foreclose the lender's mortgage against a borrower who reasonably regarded the attorney as his own lawyer.

Q: Why did the prior representation matter?

A: Because A had handled about three prior matters for B and never said he was acting only for the lender, the Committee found it reasonable that B considered A his lawyer in the mortgage transaction, unlike the lawyer in Hanson who had never represented the borrower.

Q: Did B's consent to the loan arrangement cure the problem?

A: No. The consent was to A preparing the papers and closing the loan; the Committee focused on the later foreclosure against B and the failure to clarify that A did not represent B, which it found would impair the client's confidence and create an appearance of wrongdoing.

Background and rules framework

The opinion applies the duty to a former client and the appearance-of-impropriety principle of the Canons of Professional Ethics (as stated in the Committee's Opinion 6), turning on whether the borrower reasonably regarded the lawyer as his own. In current New Jersey terms, the former-client conflict maps to RPC 1.9 and the underlying who-is-the-client question to RPC 1.7.

Citations and references

Cases:

• Hanson v. Janitschek, 57 N.J. Super. 418 (App. Div. 1959), rev'd on the dissent, 31 N.J. 545 (1960): distinguished; there the attorney had never previously represented the borrowers

Other authorities:

• Canons of Professional Ethics (duty to a former client; appearance of wrongdoing)

Other opinions cited:

• NJ ACPE Opinion 6, 86 N.J.L.J. 718 (1963): impairing a client's confidence and the appearance of wrongdoing

See also

• NJ ACPE Op. 97: A Divorce Suit Against a Former Criminal Client
• NJ ACPE Op. 158: Conflict of Interest; Suing a Former Client
• NJ ACPE Op. 153: Representing Heirs Against a Former Client Administrator

Source

• Landing page: https://law.justia.com/cases/new-jersey/advisory-committee-on-professional-ethics/2004/acp94-1.html

Original opinion text

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

89 N.J.L.J. 333
May 26, 1966

OPINION 94

Foreclosure Against Former Client

During the past several years, Attorney A represented B in about three legal matters, the last one being a few years ago. However, since then and some time ago B appeared at A's office inquiring whether A could obtain a mortgage loan for him, and A did so from C, a client of A's. Nothing was expressly stated as to whether A represented B as an attorney or as a broker. Nor was anything mentioned about the possibility of conflict of interests. C is not a lending institution but an individual who made the loan for investment.

With the consent of both B and C, A prepared all the mortgage papers and closed the loan. All legal expenses for the title search, etc. were paid to A by B pursuant to an agreement between B and C prepared by A. The bond and mortgage were prepared with standard printed forms. The agreement (in the form of a letter signed by C and addressed to B who also approved same in writing) contained the terms of the mortgage loan and provided that the title search and mortgage papers were to be prepared by "A, attorney, at your expense."

B has defaulted and C desires to retain A to foreclose B's mortgage. The question raised is the propriety of Attorney A's foreclosing C's mortgage against B.

The facts as stated do not reveal that attorney A informed his former client B that he was not acting for B in this transaction, but was acting solely as attorney for C, the prospective mortgagee. The inquirer calls to our attention the case of Hanson v. Janitschek, 57 N.J. Super. 418 (App. Div. 1959) in which Judge Conford's dissenting opinion was used as the grounds for reversal by our Supreme Court, 31 N.J. 545 (1960). The facts in the Hanson case differ from those stated in the inquiry. In Hanson, the opinion clearly states:

It does not appear that he had ever previously represented or acted as legal advisor to Mr. or Mrs. Hanson in any capacity whatever. Id. at 431.

The facts before us indicate that A had represented B "in about three legal matters." It is reasonable to assume, therefore, that B considered A as his lawyer in the mortgage transaction.

The applicable principle may be found in our Opinion 6, 86 N.J.L.J. 718 (1963), wherein we stated:

Such conduct would tend to impair the confidence which a client has the right to repose in his attorney and would thus tend to destroy one of the essentials of the professional relationship. ... To maintain public confidence in the bar, it is necessary not only to avoid actual wrongdoing, but even appearance of wrongdoing.

It is the Committee's opinion that it would be improper for A to foreclose C's mortgage against B.