When a lawyer's deeds for a client turn out to be the wrong instruments and harm the original owners' title, what may the lawyer disclose and what must he do about the client's inaction?

Plain-English summary

In 1984 a mobile home sales organization asked Lawyer L to prepare two deeds: one conveying real estate from a husband and wife to the organization, and one conveying the same property from the organization to a financing corporation. The organization later told Lawyer L that the documents should instead have been a deed of trust securing the organization, which would have assigned it and the secured note to the financing corporation. Lawyer L wrote the organization advising that the property should be returned to the original grantors and a proper deed of trust recorded, but the organization had not acted, and Lawyer L had not contacted the original landowners. The inquiry asked what duty Lawyer L owed the original landowners about their title status, and what duty he owed the unresponsive organization.

The opinion concluded that the organization was Lawyer L's client, and its statements that the deeds were the wrong documents were "confidential information" under Rule 4(a), which Rule 4(b) bars disclosing except as Rule 4(c) permits. Absent specific instructions to the contrary, Lawyer L appears impliedly authorized under Rule 4(c)(1) to disclose the nature of the problem to the original landowners and suggest corrective action; but if the organization has forbidden disclosure, Lawyer L must maintain confidentiality. Because allowing the mistake to continue would ultimately cause inconvenience, expense, and perhaps injustice, Lawyer L should call on his client under Rule 7.2(b)(1) to rectify the situation, and if the client refuses, should discontinue the representation. Lawyer L might also properly contact the original landowners and advise them, under Rule 7.4(b), that they may wish to secure independent counsel about the transaction.

Currency note

This opinion was issued in 1986, before the North Carolina State Bar's adoption of the 2003 revisions to the Rules of Professional Conduct. The provisions it applies (Rule 4 on confidentiality and implied authorization, Rule 7.2(b)(1) on rectifying a fraud or mistake before a tribunal, and Rule 7.4(b) on advising unrepresented persons) have since been renumbered and revised (the corresponding Model Rules are 1.6, 3.3, and 4.3). 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: Are the client's statements about the deed mistake confidential?

A: Yes. The opinion concluded the organization's statements that the deeds were the wrong documents are "confidential information" under Rule 4(a), which the lawyer generally may not reveal (Rule 4(b)).

Q: Can the lawyer warn the original landowners about the title problem?

A: Usually yes. The opinion concluded the lawyer is impliedly authorized under Rule 4(c)(1) to disclose the problem and suggest corrective action unless the client has forbidden disclosure.

Q: What must the lawyer do about the client's inaction?

A: The opinion concluded the lawyer must call on the client under Rule 7.2(b)(1) to rectify the mistake and, if the client refuses, discontinue the representation; he may also advise the original landowners under Rule 7.4(b) to seek independent counsel.

Background and rules framework

The opinion applied North Carolina Rule 4 on confidentiality, including the implied-authorization exception (corresponding to Model Rule 1.6), Rule 7.2(b)(1) on rectifying a mistake affecting a transaction (corresponding to Model Rule 3.3), and Rule 7.4(b) on advising unrepresented persons (corresponding to Model Rule 4.3). The analysis turned on whether disclosure was impliedly authorized, the duty to seek correction, and withdrawal if the client refused.

Citations and references

Rules of Professional Conduct:

• North Carolina Rule 4(a), (b), (c)(1) (confidentiality; implied authorization)
• North Carolina Rule 7.2(b)(1) (rectifying a mistake)
• North Carolina Rule 7.4(b) (advising unrepresented persons)
• MR 1.6 (confidentiality); MR 3.3 (candor toward the tribunal); MR 4.3 (dealing with unrepresented persons)

See also

• NC Ethics Op. RPC 23: reporting real estate closings to the IRS
• NC Ethics Op. RPC 15: contacting an unrepresented party

Source

• Landing page: https://www.ncbar.gov/for-lawyers/ethics-and-governing-rules/ethics-opinions/opinions/rpc-12/

Original opinion text

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

Inquiry:

In 1984 Lawyer L was asked by a mobile home sales organization to prepare two deeds. One deed was for conveyance of certain real estate from a husband and wife to the mobile home sales organization. The second deed was to convey the same property from the mobile home sales organization to a financial corporation. Since then, a representative of the mobile home sales organization informed Lawyer L that the deeds should, in fact, have been a deed of trust to secure the mobile home sales organization, which would have assigned it and the note secured thereby to the financing corporation. Lawyer L has written the mobile home sales organization advising its representative that the property should be put back in the names of the original grantors and a proper deed of trust from them should be put on the record. To date, the mobile home sales organization has not, as far as Lawyer L is aware, attempted to get the instruments changed from deeds to a deed of trust. Lawyer L has not contacted the original land owners.

What duty does Lawyer L owe the original land owners concerning advising them of the status of their title? Since the mobile home sales organization has not responded to Lawyer L's recommendations to straighten out the title problems, what duty does Lawyer L owe that organization?

Opinion:

Lawyer L was employed by the mobile home sales organization, and the information he received from the mobile home sales organization was given to him in his capacity as the organization's attorney. The statements by the mobile home sales organization representative indicating that the deeds were not the documents which should have been drawn up and executed are "confidential information" within the meaning of Rule 4(a). Rule 4(b) prohibits the lawyer from revealing confidential information except as permitted by Rule 4(c). In this situation it would appear that Lawyer L is, in the absence of specific instructions to the contrary, impliedly authorized to disclose the nature of the problem to the original land owners and suggest corrective action under Rule 4(c)(1). If, however, the mobile home sales organization has forbidden disclosure, Lawyer L is obligated to maintain confidentiality. Since it is apparent that suffering the mistake to continue uncorrected would ultimately cause inconvenience, expense, and perhaps injustice, Lawyer L should call upon his client pursuant to Rule 7.2 (b)(l) to rectify the situation and, if the client refuses to do so, Lawyer L should discontinue the representation. It would also appear that Lawyer L might properly contact the original land owners and advise them pursuant to Rule 7.4 (b) that they may wish to secure the advice of independent counsel in regard to the transaction.