Can a lawyer hired by creditors to open an estate administration also collect a fee from the estate for recovering one of its assets?

Plain-English summary

After Opinion 66 held that it would violate Canon 6 for a lawyer representing an estate to file a third person's claim against the estate and seek a fee from the estate for collecting it, this inquiry posed a different fact pattern. A man died leaving debts; his heirs declined to take out an administration; various creditors hired a lawyer to take out an administration and collect their claims, and one creditor became administrator. The estate's principal asset was an insurance policy, which the lawyer had to reduce to cash in a contest with a third party who was neither an heir nor a creditor.

The Committee concluded that these facts present an exception to the rule in Opinion 66. Texas statutes give creditors the right to take out an administration to collect their debts when the heirs decline, and the lawyer was properly following that procedure and representing the creditors throughout. In collecting the insurance proceeds for the estate against a third party who was neither heir nor creditor, there was no conflict of interest; the lawyer was effectively representing both the estate and his real clients, the creditors, and was entitled to a fee from the estate for that service (9-0).

Currency note

This opinion was issued in 1953, under the former Texas Canons of Ethics, which the Texas Disciplinary Rules of Professional Conduct replaced effective January 1, 1990. Conflicts of interest are now governed by Texas Disciplinary Rule 1.06 and ABA 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 Treat this page as historical context, not current guidance.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: Could the creditors' lawyer also take a fee from the estate here?

A: Yes. The Committee held that, on these facts, he was entitled to a fee from the estate for reducing the insurance policy to cash, with no conflict of interest (9-0).

Q: How did this differ from Opinion 66?

A: The Committee treated these facts as an exception to Opinion 66, because the creditors had a statutory right to open the administration and the lawyer represented the creditors throughout, with the estate's adversary being a non-heir, non-creditor third party.

Background and rules framework

The opinion interprets former Texas Canon 6 (conflicting interests), distinguishing the situation from Opinion 66. It rests on the Texas statutes giving creditors the right to take out an administration when heirs decline. The modern analog is ABA Model Rule 1.7 (concurrent conflicts of interest).

Citations and references

Rules of Professional Conduct:

• MR 1.7 (concurrent conflicts of interest), as the modern analog
• Texas Canon 6 (conflicting interests)

Other opinions cited:

• Texas Ethics Opinion 66: lawyer for an estate may not file a third person's claim against the estate and charge the estate a fee; this opinion is an exception

See also

• TX Ethics Op. 89: Contingent-Fee Subrogation Claims
• TX Ethics Op. 86: Plaintiff's Lawyer Representing the Garnishee
• TX Ethics Op. 99: Insurer's Counsel and Conflicting Interests

Source

• Landing page: https://www.legalethicstexas.com/resources/opinions/opinion-74/
• Original PDF: https://tcle-web.s3.amazonaws.com/public/documents/Opinion_74.pdf

Original opinion text

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

QUESTION PRESENTED

Shortly after Opinion No. 66 was released by this committee, which opinion was, in substance, that it would be a violation of Canon 6 for an attorney who represents an estate to file a claim on behalf of a third person against the estate and to request an attorney's fee from said estate for the collection of said claim, the following state of facts was submitted for a ruling:

A man dies, leaving debts, largely those of last illness and burial. His heirs decline to take out an administration. Various creditors of the estate employ an attorney to take out an administration, and to undertake to collect their claims. Such attorney takes out an administration, and one of the creditors is appointed as administrator. The principal asset of the estate consisted of an insurance policy, which the attorney was required to reduce to cash in a contest with a third party who was not an heir or creditor of the estate.

Based upon the foregoing state of facts, would it be a violation of the Canons of Ethics for such attorney to receive fees from these various creditors for the collection of their claims, and also to receive a fee from the estate for his services in reducing the insurance policy to cash as an asset of the estate against the claim of the third party who was not an heir or a creditor of the estate?

18 Baylor L. Rev. 228 (1966)

CONFLICTING INTERESTS - EMPLOYMENT - ESTATES
An attorney, employed by various creditors of an estate to take out an administration and to collect their claims, may receive fees from the creditors for collecting their claims, and also receive a fee from the estate for reducing an insurance policy to cash as an asset of the estate against the claim of a party who was not an heir or a creditor of the estate.

Canon 6.

It is the opinion of the committee that the above state of facts presents an exception to the rule announced in Opinion 66. The Statutes of Texas clearly give a creditor, or creditors, the right to take out an administration for the purpose of collecting their debts when the heirs decline to do so. This attorney was properly following that procedure, and was representing the creditors throughout. In the collection of the proceeds of the insurance policy on behalf of the estate against the claim of a third party who was not an heir or creditor, there was no conflict in interest. The attorney was properly and effectively representing the interests both of the estate and his real clients, the creditors, and he was entitled to assert a claim against the estate for his fee for such service. (9-0)

Tex. Comm. On Professional Ethics, Op. 74 (1953)