CPR 101

CPR 101

Inquiry: By CPR 17, issued in July, 1974, we called attention to G.S. 58-135.1 which became effective July 1, 1974, prohibiting lawyers and others performing services incident to or a part of any real estate settlement or sale to receive directly or indirectly any kickback, rebate, commission or other payment in connection with the issuance of title insurance for any real property which is a part of such settlement or sale, and we withdrew Ethics Opinion 459 issued in 1964 which permitted such practice if full disclosure was made.

We called attention to subsection (c) of GS 58-135.1 providing in part:

"No persons or entity shall in violation of this section solely by reason of ownership of stock in a bona fide title insurance company, agency or agent." (Emphasis supplied)

In CPR 17, we stated:

"Whether a lawyer who certifies title to a title insurance company or agency in which he owns stock is ‘solely' a shareholder and, therefore, protected by the quoted portion of subsection (c) is a question of law upon which no opinion is expressed."

Thereafter, on September 27, 1974, Attorney General Carson rendered an opinion pointing out that GS 58135.1 is a criminal statute and must be strictly construed and concluding, "that if the only thing someone who is involved in the real estate transaction described in the statute has done is to own stock in a title agency or insurance company, that person cannot be found guilty of violating the statute."

While an opinion of the Attorney General of the State of North Carolina is entitled to respect, it should be remembered that he was dealing with the interpretation of a criminal statute. It did not purport to deal with the ethical question. We now deal with the ethical question. We now deal with the question of whether it is ethical for a lawyer performing services in a real estate settlement or sale to certify title to a title insurance company, agency, or agent in which the lawyer has a financial interest.

Opinion: Many practices which are not criminal are unethical. It is unethical for a lawyer who owns a substantial interest, directly or indirectly as through family members or business or professional associates, in a title insurance company, agency, or agent, and who acts as lawyer in a real estate settlement or sale insured by such title insurance company or through such agency or agent, to receive any commission, fee, salary, dividend, or other compensation or benefit from such title insurance company, agency or agent, whether or not such fact is disclosed to the client for whom he performed said services.