Can a bank require borrowers to use the bank's attorney for loan papers, can one lawyer represent both buyer and seller, and can the buyer's lawyer offer to prepare the seller's deed?

Plain-English summary

Banks in a city retained attorneys for a small annual fee and referred loan customers to those attorneys, who charged the customers regular fees. The inquiry asked whether it violated the Canons for such an attorney to tell borrowers they must employ the bank's attorney to prepare all loan papers, for bank officers to refer customers without asking about their choice of counsel, or for officers to tell customers they need not hire their own lawyer. A second inquiry asked whether a buyer's attorney could write the seller offering to prepare the seller's deed at a nominal fee, charged to the buyer, while stating he did not represent the seller.

On the lending question, all members agreed the bank had a right to require that its attorney prepare the mortgage and promissory note. Five members concluded that other papers, such as deeds and curative matters, should be prepared by the attorney the borrower selects, and that the attorney, not the bank, should charge the fees. Two members relied on Opinion 150 to conclude the bank could require its attorneys to prepare all the loan papers. All members agreed the borrower can and should employ his own attorney for the transaction. The vote on this part was 5-2.

On dual representation, the Committee concluded that the buyer and seller may each have an attorney or may agree to use the same one. If, after full disclosure of the facts and without solicitation by an attorney, the parties agree to use the same attorney and agree on who pays the fees, the attorney may represent the otherwise conflicting interests and either party may pay.

On the second inquiry, the Committee held that the buyer's lawyer's quoted letter to the seller was a direct solicitation of employment to prepare the seller's deed and violated Canon 24. That vote was 7-0.

Currency note

This opinion was issued in 1959, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. 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 Treat this page as historical context, not current guidance.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 bank require borrowers to use the bank's attorney for loan papers?

A: Under this opinion, in part. All members agreed the bank may require its attorney to prepare the mortgage and note, but a majority concluded that other papers, such as deeds and curative matters, should be prepared by the borrower's chosen attorney, and that the borrower can and should employ his own counsel.

Q: Can one lawyer represent both the buyer and seller in a real estate sale?

A: Yes, under conditions. The Committee held that after full disclosure of the facts, and agreement by the parties on representation and on who pays the fees, all without solicitation, the lawyer may represent the otherwise conflicting interests.

Q: Can the buyer's lawyer offer to prepare the seller's deed?

A: No, as phrased here. The Committee held that the buyer's lawyer's letter offering to prepare the seller's deed was a direct solicitation of employment in violation of Canon 24.

Background and rules framework

The opinion interprets former Texas Canon 6 (conflicting interests), Canon 24 (solicitation), and Canon 32 (a lawyer's independence from a third party who refers or pays), in a lending and real-estate-transaction setting. The modern analogs are ABA Model Rule 1.7, on concurrent conflicts of interest, Model Rule 7.3, on solicitation of clients, and Model Rule 5.4, on the lawyer's professional independence.

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• MR 7.3 (solicitation of clients), as the modern analog
• MR 5.4 (professional independence of a lawyer), as the modern analog
• Texas Canons 6, 24, 32 (former canons)

Other opinions cited:

• Texas Opinion 150: relied on by the minority on a bank requiring its attorney for all loan papers

See also

• TX Ethics Op. 262: Bank Trust Officer's Legal Work
• TX Ethics Op. 295: One Lawyer, Two Tax Agencies
• TX Ethics Op. 231: Retainer With Client-Paid Offices
• TX Ethics Op. 265: Soliciting Work via a Friend

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-228/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_228.pdf

Original opinion text

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

QUESTION PRESENTED

Each bank in a city employs attorneys on a retainer basis for $100 per year. Each bank then refers its customers to its attorney who charges such customers a fee for his services based upon regular fee charges.

Is it a violation of the Canons of Ethics (a) for an attorney so retained to advise customers of the bank upon applying for real estate loans that if they want the bank to make the loan, they must employ the bank's attorney to prepare all papers involved in the transaction; or (b) for the officers of the bank to automatically refer their customers to the bank's attorney without inquiring as to their choice of counsel; or (c) for the bank's officers to advise their customers that the bank has an attorney and they do not need to employ their own attorney?

Is it a violation of the Canons of Ethics for an attorney representing the buyer in a real estate transaction to advise the seller as follows: "I am representing [ ], buyer, and will inspect the papers for him and prepare the deed of trust and notes. If you want me to do so, I will prepare your deed for $[ ] (nominal fee) and will charge that fee to the buyer. If he wants you to pay this, and you agree, he can so provide; however, I want you to understand that I am not representing you in this transaction."?

18 Baylor L. Rev. 309 (1966)

SOLICITATION - INTERMEDIARIES - LENDING INSTITUTION REQUIRING USE OF DESIGNATED ATTORNEY
A bank has the right to select its own attorneys and to require that these attorneys prepare the mortgage and promissory notes in connection with a loan made by the bank; the attorneys so selected may properly accept such employment and may advise prospective borrowers of this policy. Other papers such as deeds and curative matter should be prepared by the attorney selected by the borrower.

CONFLICTING INTERESTS - SAME ATTORNEY FOR BOTH PARTIES IN A REAL ESTATE TRANSACTION
An attorney, after a full disclosure of the facts to all parties, may properly represent both the buyer and seller of real estate if the parties agree thereto.

SOLICITATION
The attorney for a buyer of real estate may not advise the seller that he is representing the buyer and will thus prepare the deed of trust and promissory notes and that he will prepare the deed for the seller either at buyer's or seller's expense according to their desires.

Canons 6, 24, 32.

All members agree that the bank has a right to require that the bank's attorney prepare the mortgage and promissory note. Five members conclude that other papers such as deeds and curative matters should be prepared by the attorney selected by the borrower. The attorney fees should be charged by the attorney and not by the bank. Two members rely upon Opinion 150 to conclude that the bank has the right to select its own attorneys and to require that these attorneys prepare all papers in connection with a loan made by the bank, and that the selected attorneys may properly accept employment to prepare all of such papers. (5-2.)

All members agree that the borrower can and should employ his own attorney to represent him in the transaction.

The buyer and seller may each have an attorney or they may agree to use the same attorney. If, after a full disclosure of the facts, the parties agree to the use of the same attorney and also agree as to which party shall pay the fees, all without solicitation by an attorney, the attorney may properly represent the otherwise conflicting interests and either party may properly pay the fees.

However, the advice to the seller quoted in the inquiry is a direct solicitation by the attorney of employment to prepare the deed for the seller and is a violation of Canon 24. (7- 0.)

Tex. Comm. On Professional Ethics, Op. 228 (1959)