87 N.J.L.J. 281
May 7, 1964
Conflict of Interests
Representation at Closing
An attorney inquires about the ethics of his conduct in the
A, a lawyer, is a full-time employee of X Corporation, one of whose affiliate corporations is Y, a large real estate development company which sells apartment units under the condominium concept of ownership. A does all the legal work for Y in closing its sales. The purchaser is charged a flat sum of $150 as closing costs, "which will include costs for examination of title, title insurance policy survey, appraisal and credit report fees, mortgage service
charges and all other usual closing costs." A receives a salary from X, no part of which comes from the $150 closing fee.
The contract of sale does not require the purchaser to employ A's services and A does not directly purport to represent the purchaser. The attorney states that he represents the mortgagee who has full knowledge of A's employment with X and Y and all parties desire this arrangement; that there is a compulsory requirement for a mortgagee title policy, that the purchaser may obtain a fee policy if desired and, if so, his office will obtain it for him. The charge for both the mortgagee and owner's policy is included in the $150.
The following statement appears on the covering letter forwarding the contract to the purchaser:
Y, Inc., will be represented at closing by its attorney. You may, if you desire, retain your own attorney to represent you at closing and in all matters preliminary to closing.
The Committee is of the opinion that the attorney in closing
title for the seller has not fulfilled the obligation which is set forth in Canons of Professional Ethics, Canon 6:
It is the duty of a lawyer at the time of retainer to disclose to the client all the circumstances of his relations to the parties, and any interest in or connection with the controversy, which might influence the client in the selection of counsel.
It is unprofessional to represent conflicting interests, except by express consent of all concerned given after a full disclosure of the facts. Within the meaning of this canon, a lawyer represents conflicting interests when, in behalf of one client, it is his duty to contend for that which duty to another client requires him to oppose.
The agreement with respect to closing fees, after specifying not unusual charges, then adds "and all other usual closing costs." This provision in the agreement may lead a buyer to believe that he need not engage independent counsel to represent and protect his interests. Nor do we believe that there is a "full disclosure of the facts" contained in the statement in the letter forwarding the contract to the purchasers stating that the seller will be represented at closing by its attorney but that the buyer may, if he desires, retain his own attorney to represent him at closing. This statement does not alert the buyer to the fact that his interests might be better protected by his engagement of independent counsel. See N.J. Advisory Committee on Professional Ethics, Opinion 7, 86 N.J.L.J. 405 (1963), and In re Kamp, 40 N.J. 588 (1963).
The attorney states in his letter that the purchaser may obtain a fee policy if desired and, if so, his office will obtain it for him. When would it not be to the advantage of the purchaser to have a fee policy? Yet, here he must indicate his desire to get it. Who will advise him to ask for a fee policy?
We recognize that the letter enclosing the agreement sets forth that the seller will be represented at closing by its attorney; that there is no express representation that the seller's
attorney will represent anyone else. But we believe that the agreement and the letter must be considered as a unit, and that the attorney appearing at the closing under these circumstances is acting improperly.