Can a lawyer keep representing the first mortgage holder in a foreclosure when the lawyer's own firm holds a second mortgage on the same property and is named as a defendant?

Plain-English summary

Opinion E-85-4 addressed a lawyer who commenced a mortgage foreclosure for the first mortgage holder, with the complaint seeking a deficiency judgment, while the lawyer's own office held a subordinate second mortgage on the same property. The lawyer listed the firm as a defendant, intending as second lienholder to claim any surplus from the sheriff's sale. The question was whether the lawyer could continue representing the first mortgage holder.

The committee restated the former Code's general rule that, absent client consent after full disclosure, a lawyer may not accept employment if professional judgment will be or reasonably may be affected by the lawyer's own financial, business, or property interests (former SCR 20.24(1), 20.23(1)), and that a lawyer should explain the situation and withdraw unless the client consents where interference can reasonably be foreseen (SCR 20.23(2)(b)). Drawing on its Formal Opinion E-83-9, the committee noted that conflicts of this kind can often be resolved with client consent, and that here all lienholders appeared to share the same interest, to see the sheriff's sale bring the highest bid, so there was little likelihood of adverse effect on the lawyer's judgment.

Nonetheless, the committee concluded that continued representation would be improper. Citing the duty to avoid even the appearance of impropriety (former SCR 20.48), Ennis v. Ennis, and the duty to promote public confidence in the legal system, it reasoned that a layperson, or a lawyer unfamiliar with the facts, could easily suspect improper conduct when the plaintiff's lawyer names the lawyer's own firm as a defendant. The high probability of such appearances necessitated withdrawal (former SCR 20.16).

Currency note

This opinion was issued in 1985, before Wisconsin's July 1, 2007 adoption of the revised Rules of Professional Conduct for Attorneys (the state's Ethics 2000 update), and it analyzes conduct under the former Code, including the now-superseded "appearance of impropriety" standard. Personal-interest conflicts are now governed by SCR 20:1.7 / Model Rule 1.7 and withdrawal by SCR 20:1.16 / Model Rule 1.16. 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 Treat this page as historical context, not current guidance.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 lawyer foreclose for one mortgagee while the lawyer's firm holds another mortgage on the property?

A: The committee concluded that, on these facts, continued representation was improper and the lawyer had to withdraw.

Q: Could client consent cure the conflict?

A: The committee noted the conflict might be resolvable with client consent because the lienholders shared an interest in a high sale price, but concluded the appearance of impropriety still required withdrawal.

Q: Why did the appearance of impropriety matter so much here?

A: The committee reasoned that naming the lawyer's own firm as a defendant in the lawyer's own foreclosure could easily lead a layperson to suspect improper conduct, undermining public confidence.

Background and rules framework

The opinion interpreted the former Code's self-interest conflict provisions (SCR 20.24(1), 20.23) and the appearance-of-impropriety and public-confidence provisions (SCR 20.48), with withdrawal under SCR 20.16. Personal-interest conflicts are now governed by SCR 20:1.7 / Model Rule 1.7 and withdrawal by SCR 20:1.16 / Model Rule 1.16; the former "appearance of impropriety" standard was not carried forward into the current rules.

Citations and references

Rules of Professional Conduct:

• Wis. SCR 20.24(1), 20.23, 20.48 / Model Rule 1.7 (conflicts of interest; self-interest) (former Code provisions)
• Wis. SCR 20.16 / Model Rule 1.16 (withdrawal) (former Code provision)

Cases:

• Ennis v. Ennis, 88 Wis. 2d 82, 276 N.W.2d 341 (1979)

Other opinions cited:

• Wisconsin Formal Op. E-83-9

See also

• WI Ethics Op. E-86-16: Lawyer-Director of an Insurer Whose Firm Sues the Insurer
• WI Ethics Op. E-85-3: Multiple Representation in Medical Malpractice Actions
• WI Ethics Op. E-92-1: Representing a Plaintiff and the Subrogated Insurer

Source

• Landing page: https://www.wisbar.org/formembers/ethics/pages/formal-opinions.aspx
• Original PDF: https://www.wisbar.org/formembers/ethics/Ethics%20Opinions/E-85-4.pdf