Can a lawyer take a mortgage on the client's marital home to secure fees in the client's divorce case?

Plain-English summary

In a divorce commenced by W, husband H retained an attorney but, instead of paying an initial fee, offered the attorney a mortgage on his half interest in the marital home (which H and W owned as joint tenants), without W's knowledge. Both parties sought physical placement of the children, and W, who lived in the home, was reluctant to agree to a sale before a custody order. Later, H's law firm brought an action to force a sale, claiming W was committing waste and not paying taxes and insurance. The Grievance Commission asked whether taking a security interest in the marital residence to secure fees violated the Code, and if not, whether forcing a sale before or after the divorce judgment did.

The Commission explained that under Maine's marital property statute (19 M.R.S.A. section 722-A), virtually all property acquired during marriage is marital property subject to disposition by the divorce court. Rule 3.7(c) bars a lawyer from acquiring a proprietary interest in the cause of action or subject matter of litigation he is conducting, except to assert a lien granted by law against the proceeds or to contract for a reasonable contingent fee. The Commission concluded that acquiring an interest in the marital home would violate Rule 3.7(c), because a share of the marital real estate is commonly a principal issue in a contentious divorce, so a legally cognizable interest in the homestead is an interest in the subject matter of the litigation.

The Commission read the Rule 3.7(c)(i) lien proviso as permitting only a statutory or common-law charging lien on the proceeds of litigation (which it noted appear not to attach until final judgment), not the consensual contractual creation of a lien on the marital homestead. It observed that other states had reached varying results, contrasting Mississippi and Georgia opinions and noting Connecticut's middle-ground approach (permitting the mortgage but subjecting it to the court's further orders and barring disposition to a bona fide purchaser). Given the breadth of the marital property statute and the plain language of Rule 3.7(c), the Commission concluded the taking of the mortgage improperly injected the attorney's interests into the divorce and created an unacceptable risk that the attorney's judgment would be affected, so it violated Rule 3.7(c); it therefore found no need to answer the second question about foreclosure.

Currency note

This opinion was issued in 1989, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). 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 divorce lawyer secure fees with a mortgage on the client's marital home?

A: The opinion concluded no. The marital home is part of the subject matter of the divorce, so taking a mortgage on it gives the lawyer a barred proprietary interest under Rule 3.7(c).

Q: Doesn't the rule allow a lawyer to assert a lien for fees?

A: The opinion read the lien exception as allowing only a statutory or common-law charging lien on the proceeds of litigation, not a consensual contractual mortgage on the marital homestead.

Q: Why is an interest in the marital home a problem?

A: The opinion concluded it injects the attorney's own interests into the divorce, where a share of the real estate is commonly a principal issue, creating an unacceptable risk that the attorney's judgment will be affected.

Q: Did the Commission decide whether forcing a sale was also improper?

A: The opinion did not reach that question, because it concluded the underlying mortgage itself violated Rule 3.7(c).

Background and rules framework

The opinion interprets Maine Bar Rule 3.7(c) (no acquiring a proprietary interest in the cause of action or subject matter of litigation, with exceptions for a lien granted by law and a reasonable contingent fee) and Rule 3.7(c)(i) (the lien proviso), read against Maine's marital property statute. This corresponds to ABA Model Rule 1.8(i) (a lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation, with the lien and contingent-fee exceptions) and the business-transaction limits of Model Rule 1.8(a).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.8(i) (proprietary interest in litigation); Model Rule 1.8(a) (business transactions with clients)
• Maine Bar Rule 3.7(c), 3.7(c)(i)

Statutes:

• 19 M.R.S.A. section 722-A (marital property); 14 M.R.S.A. section 5006 (charging lien)

Cases:

• Stone v. Hyde, 22 Me. 318 (1843); Averill v. Longfellow, 66 Me. 237 (1876); Newbert v. Cunningham, 50 Me. 231 (1863)

Other opinions cited:

• Mississippi Op. 152; Georgia Op. 86-7; Connecticut Op. 87-3

See also

• Maine Ethics Op. 117: Mortgaging the Marital Residence to the Attorney After Property Division
• Maine Ethics Op. 116: Client Funds Owed to Third Persons

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=91491

Original opinion text

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

Issued by the Professional Ethics Commission

Date Issued: May 3, 1989

The Grievance Commission has requested an opinion of the Professional Ethics Commission based upon the following facts:

H and W are married and own a home acquired during the marriage as joint tenants. Divorce proceedings are commenced by W. H retains an attorney, but does not pay an initial fee. Instead, he offers to give his attorney a mortgage on his 1/2 interest in the marital home. W is not aware of this transaction.

Both H and W are seeking physical placement of the children. W is reluctant to agree to a sale of the marital home until there is an order from the Court for primary residence of the children. W resides in the home.

Later, H's law firm brings an action to force the sale of the home, claiming W is committing waste and not paying for property taxes and insurance.

Questions

• Is it a violation of the Code of Professional Responsibility for an attorney to take a security interest in the marital residence to secure the legal fees of a client in a divorce action?

• If not, is it a violation of the Code of Professional Responsibility for the attorney to take legal action to force a sale of the residence or otherwise foreclose upon the security interest prior to the rendition of a divorce judgment? After rendition of a divorce judgment?

Discussion

Since the enactment of 19 M.R.S.A. § 722-A (P.L. 1971, c. 399), virtually all property acquired by parties who are married has become marital property, subject to disposition by the divorce court. Except for property which is within narrowly defined exceptions to the marital property statute, the property of the husband and wife is clearly subject to disposition by the Court in the course of a proceeding for divorce.

Rule 3.7(c) provides:

A lawyer shall not acquire a proprietary interest in the cause of action or subject matter of litigation he is conducting for a client except that he may:

(i) assert a lien granted by law against the proceeds of such action or litigation to secure his fee or expenses . . .

(ii) contract with a client for a reasonable contingent fee as provided in Rule 8.

It is the opinion of the Commission that acquiring a proprietary interest in the marital home in a divorce action would constitute a violation of Rule 3.7(c).

Among the many issues in a contentious divorce, the desire to be awarded a substantial share of the marital real estate is commonly a principal motivation. For either lawyer to obtain a legally cognizable interest in the client's marital homestead constitutes an interest in the subject matter of litigation under Rule 3.7(c). The provisions of Rule 3.7(c)(i) which authorize a lawyer to "assert a lien granted by law . . ." are to be read as permitting an attorney to assert a statutory and/or common law charging lien on the proceeds of litigation, see 14 M.R.S.A. § 5006; Stone v. Hyde, 22 Me. 318 (1843). Although we offer no opinions as to what the law is, it does appear to the Commission that such liens do not attach until a final judgment in an action, Averill v. Longfellow, 66 Me. 237 (876); Newbert v. Cunningham, 50 Me. 231 (1863). We do not read this proviso in the Rule as authorizing the consensual contractual creation of a lien between lawyer and client with respect to the marital homestead. Other states have reached varying results, (contrast Mississippi Opinion No. 152 (6/2/88) ABA/BNA Lawyer's Manual of Professional Conduct Section 901:5108, with Georgia Opinion 86-7, supra at Section 901:2701). Connecticut has adopted what is essentially a middle ground, holding that although the taking of a mortgage was permissible, the taking of the mortgage was nonetheless subject to the further orders of the Court with respect to the disposition of the property, and that to protect the continued jurisdiction of the Court, the attorney was prohibited from taking any action to dispose of the mortgage to a bona fide purchaser, Connecticut Opinion 87-3, ABA/BNA Lawyer's Manual of Professional Conduct, at § 901:2054.

In light of the breadth of the Maine marital property statute and the plain language of Rule 3.7(c), the taking of an interest in the marital property by the attorney inappropriately interjects the interests of the attorney into the issues in the divorce case, creating an unacceptable risk that the judgment of the attorney will be affected by his acquisition of the interest.

For those reasons, we answer the first question by concluding that the taking of a mortgage on the marital homestead would violate the provisions of Rule 3.7(c). In light of the foregoing opinion there appears to be no reason to answer the second question.