Prohibition on Initiating Foreclosure on Client's Property While Still Representing Client
Adopted: April 24, 2009
Opinion rules that a lawyer may not initiate foreclosure on a deed of trust on a client's property while still representing the client.
Inquiry #1:
Lawyer represents Client in a domestic case. In exchange for Lawyer's services, Client executed a promissory note, which was secured by a deed of trust on property that is not involved in the domestic action. Lawyer sent Client a "Notice of Demand" regarding payment on the note. Soon thereafter, Lawyer initiated foreclosure proceedings in an effort to collect on the deed of trust. Lawyer continues to represent Client in the domestic case.
May Lawyer initiate foreclosure proceedings against Client while continuing to represent Client ?
Opinion #1:
No. Although Lawyer could acquire a deed of trust on the property if he complied with Rule 1.8(a), enforcing the security interest while currently representing the grantor of the interest, even in an unrelated matter, creates a conflict of interest in violation of Rule 1.7(a)(2). Moreover, Rule 8.4(g) provides that it is professional misconduct for a lawyer intentionally to prejudice or damage his or her client during the course of the professional relationship, except as may be required by Rule 3.3. Lawyer should not initiate foreclosure proceedings against Client until the representation is concluded.
As a matter of procedure, comment [16] to Rule 1.8 provides that, prior to initiating a foreclosure on property subject to a lien securing a legal fee, a lawyer must notify a client of the right to require the lawyer to participate in the State Bar's mandatory fee dispute resolution program.