Legal Advice Concerning Lien Rights
Adopted: July 12, 1991
Opinion rules that a lawyer may disclose information concerning advice given to a client at a closing in regard to the significance of the client's lien affidavit.
Inquiry #1:
A lender (Mortgagee) loaned money to an owner (Owner). The note evidencing the loan was to be secured by a first lien deed of trust on certain real property that had been owned by the Owner for some period of time prior to the closing of the loan. An attorney (Attorney) represented both the Owner and the Mortgagee at the closing of the loan. The Mortgagee required, and instructed the Attorney, that, as a condition to the closing of the loan, a mortgagee's title insurance policy be obtained by the Attorney with respect to Mortgagee's first lien deed of trust. The title insurance company, as a condition to issuing the title insurance policy, required the usual owner's affidavit with respect to mechanics' lien.
During the course of the closing of the loan, the Owner executed the usual owner's affidavit running in favor of the title insurance company in which the Owner "certified" that no third parties had any rights to any "mechanics' lien" on the real property.
Subsequent developments indicate that, in fact, at least one third party had "mechanics' lien" rights which, because of the relation back to the commencement of the work on the Owner's real property, may be superior to the lien of the deed of trust in favor of the Mortgagee.
Litigation has now been commenced against the Mortgagee and the Owner by the contractor who claims a mechanics' lien superior to the rights of the Mortgagee in the subject real property. The Mortgagee and the title insurance company have employed counsel (Counsel), other than Attorney, and the Owner has advised Counsel that the Owner did not realize that he was signing an affidavit certifying that there were no mechanics' lien rights superior to that of the deed of trust. Counsel for the Mortgagee and title insurance company has inquired of Attorney what Attorney told the Owner about the affidavit before it was executed by the Owner.
Based on the foregoing:
Can Attorney advise Counsel as to the nature and extent of his conversation to Owner at the closing with respect to the affidavit?
Opinion #1:
Yes. Rule 4(c)(5).
Inquiry #2:
Can Attorney advise Counsel as to the nature and extent of Owner's conversation to Attorney at closing with respect to the affidavit?
Opinion #2:
Yes. See the answer to question #1.
Inquiry #3:
Would the answers to 1 and 2 be any different if Attorney was asked the questions in a deposition taken in connection with the litigation?
Opinion #3:
No.