State Bar Ethics Opinions cite the applicable California Rules of Professional Conduct in effect at the time of the writing of the opinion. Please refer to the California Rules of Professional Conduct Cross Reference Chart for a table indicating the corresponding current operative rule. There, you can also link to the text of the current rule.
Ethical considerations involved in an attorney's duty of candor to opposing counsel.
Rule 1 of the Rules of Professional Conduct of the State Bar.1
A member of the State Bar of California has asked the Committee for an advisory opinion on the ethical dilemma presented by the following situation:
The attorney was retained to represent a carpenter who had performed labor and supplied materials for an addition to a home. On the client's behalf, the attorney brought suit against the owner to foreclose a mechanic's lien. The action was contested and, after a trial of three days, the plaintiff obtained judgment. The defendant did not pay the judgment promptly. The attorney caused a sheriff's sale of the defendant's home to be held. Under the particular state of the law and the facts, no actual notice to the defendant was legally requisite to the validity of the sale and neither the defendant nor defendant's counsel in fact knew of the sale. The plaintiff bid in the property for the amount of the judgment, and thus became the owner of the defendant's home, worth much more than the amount of the judgment, subject only to the defendant's right to redeem within a year.
Some time later the defendant's counsel wrote a letter to the plaintiff's attorney, enclosing the defendant's check for the amount of the judgment. The check was tendered in full satisfaction, but it was legally insufficient for the redemption of the property since it did not include the expenses of the sheriff's sale, the existence of which was still unknown to the defendant and defendant's attorney.
The question presented is whether the plaintiff's attorney could properly have refrained from any action at that time, leaving the letter unanswered and the check unnegotiated, in the hope that the period of redemption would expire before the defendant or defendant's counsel became aware of the fact that their tender had been insufficient.
The Committee realizes that the situation arose some years ago and was properly handled at the time and that, because of an intervening statutory change concerning the kind of notice required for such sales, the problem would probably not recur on precisely identical facts. Nevertheless, the Committee feels that very similar situations are likely to arise from time to time, that the problem is one of a kind that has not previously been explored by the Committee, and that an advisory opinion might therefore be helpful to the bar.
It is the opinion of the Committee that the attorney would not have been justified in keeping silent. It is true that, under [former] canon 15 of the Canons of Ethics of the American Bar Association, an attorney must zealously advance the interests of his client, but not by using "any manner of fraud or chicane. He must obey his own conscience and not that of his client." One of the obligations of conscience to which the lawyer must conform is stated in [former] canon 22: his conduct with other lawyers "should be characterized by candor and fairness." [Former] canon 29 states that a lawyer "should strive at all times to uphold the honor and to maintain the dignity of the profession . . ." All of the canons are commended to the members of the State Bar by rule 1 of the Rules of Professional Conduct of the State Bar.
In the opinion of the Committee, it would not have been candid or fair to opposing counsel to keep silent under these circumstances. The Committee does not mean to suggest that a lawyer is automatically under a duty to warn another lawyer who may be about to allow a time limit to expire or neglect some step important to the preservation of his client's rights. Ordinarily, there is no affirmative duty to warn. But in matters of ethics, as in the law of fraud, circumstances sometimes arise under which silence is, in itself, deceptive. We think this is such a situation.
There are three elements present here which, existing in combination, created an ethical obligation to disclose the facts about the sale, or at least to return the check so as to put opposing counsel on inquiry. They are as follows:
1. The receipt of a check normally calls for some action: either to accept it, which implies acceptance of the conditions on which it was tendered, or to reject it. In business and legal transactions, payments made are usually retained; one who has transmitted a check would naturally assume that it had been found acceptable unless informed of its rejection. Total inaction, when intended as the equivalent of a rejection, is misleading.
2. Since the plaintiff's attorney knew of the sale and knew that opposing counsel was ignorant of it, a course of inaction and silence would have had an intentionally deceptive effect. The purpose would have been to induce opposing counsel to assume that the matter was closed, in order to reduce the likelihood that it would occur to him that something might be wrong and that he had better investigate.
3. A failure to disclose the legal insufficiency of the check, had it led to the loss of the right of redemption, would have produced a grossly unconscionable result by which the defendant, who was attempting to discharge his obligation, would have forfeited his home and the plaintiff, who was equitably and morally entitled only to the payment of his bill and expenses, would have been unjustly enriched.
This opinion is issued by the Standing Committee on Professional Responsibility and Conduct of The State Bar of California. It is advisory only. It is not binding upon the courts, The State Bar of California, its Board of Governors, any persons or tribunals charged with regulatory responsibilities, or any member of the State Bar.
1 [PUBLISHER'S NOTE: A complete revision of the Rules of Professional Conduct was approved by the Supreme Court effective January 1, 1975. (See (1975) 14 Cal.3d Rules 1 and "Cross Reference of Present Rules of Professional Conduct to Former Rules of Professional Conduct," in Part III.D.)]