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									   FEE ATTORNEYS: ETHICAL AND LIABILITY-RELATED
CONSIDERATIONS AFFECTING PREMIUM-FEE PARTICIPATION
          IN TITLE INSURANCE TRANSACTIONS




                                       RICHARD L. BLACK
                                  Senior Texas Underwriting Counsel
                                   Stewart Title Guaranty Company




                        State Bar Of Texas
        25TH ANNUAL ADVANCED REAL ESTATE LAW COURSE
                         July 10-12, 2003
                       San Antonio, Texas

                                                   CHAPTER 48
[The paper presented here is adapted from one written by Frank Oliver, of the Law Office of Frank Oliver, P.C., Austin, Texas,
which was presented by him at the Texa s Land Title Association’s 2002 Land Title Institute. This material is used by permission
of the author.]
                                      RICHARD L. BLACK
                                Senior Texas Underwriting Counsel
                                 Stewart Title Guaranty Company
                                     8133 Mesa Dr., Suite 202
                                        Austin, TX 78759
                                          (800) 252-9229
                                       FAX (512) 342-7061
                                   e-mail: rblack@stewart.com


                               BIOGRAPHICAL INFORMATION



EDUCATION:
   Undergraduate: B.A. With High Honors, 1973, University of Texas at Austin;
   Graduate: J.D., 1977, University of Texas School of Law, Austin, TX.

CURRENT EMPLOYMENT: Senior Vice President and Senior Texas Underwriting Counsel, Stewart
Title Guaranty Company, Austin, Texas.

PROFESSIONAL MEMBERSHIPS: State Bar of Texas and Travis County Bar Association

SPEAKER/GUEST-LECTURER EXPERIENCE: Real Estate, Bankruptcy, and Family Law Sections,
Travis County Bar Association; Real Estate Section, San Antonio Bar Association; University of Texas
Schools of Law and Business; Austin Community College; Texas Land Title Association’s Land Title
School; State Bar of Texas Agricultural Law Section; Stewart Title Guaranty Company, TIPS and Legal
Seminars.

PUBLICATIONS: “TLTA News”, Texas Land Title Association; Advanced Real Estate Course, State
Bar of Texas.

PRO BONO ACTIVITIES: Advisory Director, Texas C-Bar (Legal Aid of Central Texas)
Fee Attorneys                                                                                                                                    Chapter 48

                                                                Table Of Contents

I.    INTRODUCTION...................................................................................................................................... 1

II. TERMINOLOGY ...................................................................................................................................... 1
    A. Fee attorney ......................................................................................................................................... 1
    B. Closing attorney ................................................................................................................................... 1
    C. Approved attorney................................................................................................................................ 1
    D. “Doc Prep” attorney.............................................................................................................................. 1

III. APPLICABLE REQUIREMENTS FOR RECEIVING A PORTION OF THE TITLE INSURANCE
     PREMIUM................................................................................................................................................. 1
     A. General Rules Concerning the Amount of the Premium Split ................................................................... 2
     B. Tex. Title Insurance Act art. 9.30: (emphasis added) .............................................................................. 2
     C. Texas Title Insurance Basic Manual Procedural Rule P-22: ..................................................................... 2
     D. Tex. Disciplinary Rules of Professional Conduct, Rule 1.04(a): ............................................................... 3
     E. Tex. Comm. On Professional Ethics, Op. 408, V. 47 Tex. B.J. 44 (1984):................................................. 3

III. THE TITLE INSURANCE COMPANY BECOMES A CLIENT .............................................................. 3
     A. Tex. Comm. On Professional Ethics, Op. 408, V. 47, Tex. B.J. 44 (1984):................................................ 3
     B. "Closing the Transaction" is a Key Statutory Term of Art:....................................................................... 3
     C. Use of the P-22 Letter to Define the Scope of the Engagement With the Title Company:........................... 4
     D. The Importance of Proper Completion of the Form T-00 Verification of Services Rendered...................... 5
     E. Suggested Descriptive Model of the Fee Attorney or Closing Attorney Relationship:................................ 7

IV. REPRESENTATION BY THE FEE ATTORNEY OR CLOSING ATTORNEY OF MULTIPLE
    PARTICIPANTS IN THE REAL ESTATE TRANSACTION................................................................... 8
    A. Rule 1.06 Conflict of Interest: General Rule .......................................................................................... 8
    B. Disclosure and Consent to Multiple Client Representation....................................................................... 9
    C. Disclosure of Non-Representation to Non-Client Transaction Participants.............................................. 10
    D. Summary of Requirements .................................................................................................................. 11

V.    CONCLUSION ........................................................................................................................................ 11

APPENDIX – EXHIBIT A.............................................................................................................................. 13

APPENDIX – EXHIBIT B .............................................................................................................................. 14

APPENDIX – EXHIBIT C-1........................................................................................................................... 16

APPENDIX – EXHIBIT C-2........................................................................................................................... 17

APPENDIX – EXHIBIT D.............................................................................................................................. 18

APPENDIX - EXHIBIT E............................................................................................................................... 19

APPENDIX - EXHIBIT F ............................................................................................................................... 21




                                                                               i
Fee Attorneys                                                                                                Chapter 48

FEE ATTORNEYS: ETHICAL AND                                            •   Uses title company signage, stationary,
LIABILITY-RELATED                                                         business cards, etc.
                                                                      •   Attorney and staff are licensed escrow
CONSIDERATIONS AFFECTING                                                  officers of the title company
PREMIUM-FEE PARTICIPATION IN                                          •   Receives a percentage of the title insurance
TITLE INSURANCE TRANSACTIONS                                              premium
                                                                      •   Charges an additional escrow fee for
Edited and presented by RICHARD L. BLACK                                  settlement services
Stewart Title Guaranty Company                                        •   Operates under a detailed contract with the
                                                                          title company
Based on original materials by FRANK OLIVER                           •   Escrow accounts subject to TDI auditing
Law Office of Frank Oliver, P.C.                                          requirements [Art. 9.41(B)]
                                                                      •   Insured closing service letter [Form T-50 or
      The participation of an attorney in one or more                     T-51] usually made available by the title
aspects of the real estate closing process presents a                     insurance company for escrow defalcations
number of ethics and liability considerations and                         and failure to follow closing instructions
challenges. The participants in the typical real estate
transaction –seller, buyer, borrower, lender, mortgage           B.   Closing attorney
broker, title underwriter, title agent, and real estate               • Does not operate under the title company’s
broker – may have expectations or beliefs concerning                      name
the existence and scope of legal representation by an                 • Conducts business as an independent law
attorney participating in the process that are completely                 firm
at odds with the limited role the attorney believes that              • Attorney and his staff are not licensed escrow
he or she is actually performing or intending to                          officers of the title company
perform.       A lack of clarity in defining and                      • Receives a percentage of the title insurance
communicating regarding the existence and scope of                        premium
legal representation can give rise to serious ethics risks            • Charges an additional escrow fee for
and the potential of malpractice and other liability risks                settlement services
for the attorney.
                                                                      • Operates under a simple P letter setting
                                                                                                        -22
      The risk of confusion by a transaction participant                  forth the attorney’s schedule of charges
concerning the existence and scope of an attorney-
                                                                      • Escrow accounts not subject to TDI auditing
client relationship is particularly acute for the attorney
                                                                          requirements
who closes the real estate transaction as a fee attorney
or closing attorney and receives a portion of the title               • Insured closing service letter generally is not
insurance premium from the title insurance company                        made available by the title insurance
and an additional escrow closing fee or settlement fee                    company
from the buyer and seller. If the attorney also prepares
transaction documents, the risk of confusion is only             C. Approved attorney
heightened.                                                         • Examines title for the title insurance
      This presentation is intended to discuss some of                 company
the principal ethics rules and liability considerations             • Some continued use in rural areas
that come into play when an attorney is functioning as
a fee attorney or closing attorney, including                    D. “Doc Prep” attorney
consideration of those transactions in which the fee                • May be independent attorney representing
attorney or closing attorney may also be representing                   only the lender for a fee paid at closing by
one or more of the transaction participants.                            the borrower
                                                                    • May be affiliated in some manner with a title
I.   TERMINOLOGY                                                        company or title agent, such as an owner of
     While there is geographic and title company                        the title agent or an attorney-employee of the
variation in terminology, usage and practice, for the                   title agent
purpose of convenience, the following terminology is
used in this presentation:                                       II. APPLICABLE            REQUIREMENTS             FOR
                                                                      RECEIVING A PORTION OF THE TITLE
A. Fee attorney                                                       INSURANCE PREMIUM
   • Business conducted under the name of the                         When a portion of the title insurance premium is
       title company                                             paid by the title insurance company to the fee attorney
                                                             1
Fee Attorneys                                                                                               Chapter 48

or closing attorney, there are statutory, regulatory, and          E. No person shall give and no person shall
ethics requirements that apply and must be followed by             accept any portion, split, or percentage of any
the fee attorney or closing attorney.                              charge made or received for the rendering of a
                                                                   real estate settlement or closing in connection
A. General Rules Concerning the Amount of the                      with a transaction involving the conveyance or
   Premium Split                                                   mortgaging of real estate located in the State of
   i. The portion of the title insurance premium                   Texas other than for services actually performed.
       received by the fee attorney or the closing
       attorney must be reasonable in amount and                C. Texas Title Insurance            Basic     Manual
       commensurate with the services actually                     Procedural Rule P-22:
       performed by the fee attorney or closing
       attorney.                                                   NOTE:      THE  FULL    TEXT  OF
                                                                   PROCEDURAL RULE P-22 IS ATTACHED
     ii.   A written schedule of the charges normally              AS EXHIBIT A TO THE APPENDIX FOR
           made by the attorney for such services must             REFERENCE.
           be filed with the title insurance company at
           least thirty (30) days before the services are          “No payment shall be made by a Title Insurance
           rendered, and the schedule must have been               Company, Title Insurance Agent, Escrow Officer
           agreed to and approved by the title insurance           or any employee or agent of any of them, to any
           company.                                                Person who is not its bona-fide employee, for
                                                                   examination of a title and/or closing a transaction
     iii. At or prior to the time of receiving payment             unless:
          of a portion of the premium, the attorney
          must submit to the title insurance company a             (A) Such Person is (i) a Title Insurance Company
          written itemized statement or invoice that               as defined in Article 9.02, Insurance Code, and
          details the services actually rendered.                  qualified to do business in the State of Texas, (ii)
                                                                   a Title Insurance Agent as defined in Article 9.02,
B.   Tex. Title Insurance Act art. 9.30: (emphasis                 Insurance Code, and licensed to do business in the
     added)                                                        State of Texas by the Texas Department of
     A. No commission, rebate, discount, portion of                Insurance, or (iii) an attorney at law duly licensed
     any title insurance premium, or other thing of                by the Supreme Court of Texas to practice law in
     value shall be directly or indirectly paid , allowed          the State of Texas, to the extent not inconsistent
     or permitted by any person doing the business of              with Article 9.34, Texas Insurance Code, or (iv)
     title insurance or received or accepted by any                any Person legally authorized to perform such
     person for doing the business of title insurance or           services; and . . . [text omitted]
     for soliciting or referring title insurance
     business. . . . [text omitted].                               (D) Any payment made must be commensurate
                                                                   with the services actually performed; and
     B. This Article may not be construed as
     prohibiting: . . . (4) payments for services                  (E) The Person rendering the service shall have
     actually performed by an attorney in connection               filed with the Company at least thirty (30) days
     with title examination or closing a transaction,              prior to the rendering of such service a written
     which payment may not exceed a reasonable                     schedule of charges normally imposed by such
     charge for such services. . . . [text omitted].               Person for such services (Schedule) and such
                                                                   Schedule shall have been agreed to and
     D. The payment or receipt of a commission,                    approved by the Company as being reasonable
     rebate, discount, or other thing of value to or by            charges for such services. However, payments to
     any person for soliciting or referring title                  licensed title insurance agents are excluded from
     insurance business in violation of this Article is            the requirements of this paragraph (E); and
     engaging in the unauthorized business of
     insurance, and in addition to any other penalty,              NOTE:   A DISCUSSION DRAFT P-22
     after notice and opportunity for hearing, is subject          SCHEDULE OF CHARGES LETTER IS
     to a monetary forfeiture not less than the value nor          ATTACHED AS EXHIBIT B TO THE
     more than three times the value of the                        APPENDIX FOR REFERENCE.
     commission, rebate, discount, or other thing of
     value.
                                                            2
Fee Attorneys                                                                                                    Chapter 48

     (F) The Person rendering the service shall have             III. THE TITLE INSURANCE COMPANY
     presented to the Company, at or prior to the time                 BECOMES A CLIENT
     of payment of said services, a written itemized                   By accepting a portion of the title insurance
     statement or invoice which clearly sets forth in            premium, which is only permissible for services
     detail the actual services rendered and billed for          actually rendered, the fee attorney or the closing
     in representing the Company in the respective               attorney establishes an attorney-client relationship with
     settlement, closing and/or examination, and such            the title insurance company. The existence of an
     Company verifies, in writing, that such services            attorney-client relationship between the attorney and
     were actually rendered in accordance with form              the title insurance company imposes upon the attorney
     T-00; and                                                   all of the duties and obligations that would attach in
                                                                 any other attorney-client relationship.
     NOTE:    PROMULGATED FORM T-00
     “VERIFICATION      OF     SERVICES                          A. Tex. Comm. On Professional Ethics, Op. 408,
     RENDERED” IS ATTACHED AS EXHIBIT                               V. 47, Tex. B.J. 44 (1984):
     C-1 TO THE APPENDIX FOR REFERENCE.
                                                                            ”An attorney representing a party to a
                                                                      real estate sale may accept a percentage of
     (G) In the event of collection of the title insurance            the title insurance premium only for services
     premium by such Person, the entirety of such                     actually rendered the title company. The
     premium shall have been remitted to the                          attorney becomes the attorney of the title
     Company; and                                                     company; the fee charged the title company
                                                                      should therefore be reasonable.
     (H) No portion of the charge for the services                          The lawyer should make such
     actually rendered shall be attributable to, and no               disclosures to all his clients in the transaction
     payment shall be made for the solicitation of, or as             as the rules and statutes may require,
     an inducement for the referral or placement of the               depending on the facts in each situation, and
     title insurance business with the Company; . . .”                is bound by the usual and customary rules of
                                                                      multi-client representation as they apply to
D. Tex. Disciplinary Rules             of   Professional              the particular facts at hand."
   Conduct, Rule 1.04(a):
                                                                 B.   "Closing the Transaction" is a Key Statutory
     “A lawyer shall not enter into an arrangement                    Term of Art:
     for, charge, or collect an illegal fee or                        Article 9.30 and Procedural Rule P-22 allow the
     unconscionable fee. A fee is unconscionable                 fee attorney or closing attorney to receive a portion of
     if a competent lawyer could not form a                      the title insurance premium for services actually
     reasonable belief that the fee is reasonable.”              rendered in closing a transaction. It is important to
                                                                 remember that the terminology "closing the
E.   Tex. Comm. On Professional Ethics, Op. 408,                 transaction" is carefully defined in Texas Title
     V. 47 Tex. B.J. 44 (1984):                                  Insurance Act article 9.02(n) and has a very specific
                                                                 meaning as follows:
     NOTE: THE FULL TEXT OF OPINION 408
     IS ATTACHED AS EXHIBIT D TO THE                                  (n) "Closing the Transaction" means the
     APPENDIX FOR REFERENCE.                                          investigation made on behalf of a title
                                                                      insurance company, title insurance agent,
                                                                      or direct operation before the actual issuance
     “An attorney may accept a fee from the title                     of the title policy to determine proper
     insurance company if the attorney has                            execution, acknowledgment, and delivery of
     actually performed services on behalf of the                     all conveyances, mortgage papers, and other
     company. . . . In this regard, the fee received                  title instruments which may be necessary to
     by the attorney must be reasonable under                         the consummation of the transaction and
     Disciplinary Rule (DR) 2-106, whether based                      includes the determination that all
     on a percentage or some other mode of                            delinquent taxes are paid, all current taxes,
     calculation.”                                                    based on the latest available information,
                                                                      have been properly prorated between the
                                                                      purchaser and seller in the case of an owner
                                                                      policy, the consideration has been passed, all

                                                             3
Fee Attorneys                                                                                                  Chapter 48

     proceeds have been properly disbursed, a                    This fee for settlement services is for a service
     final search of the title has been made, and all            performed by the fee attorney or closing attorney that
     necessary papers have been filed for record.                is separate and different from "closing the transaction"
                                                                 in the technical statutory and regulatory context (i.e.,
      Procedural Rule P-1(f) in the Basic Manual                 closing the title insurance transaction).
contains the same definition of "closing the
transaction."                                                    C. Use of the P-22 Letter to Define the Scope of
      "Closing the transaction" as defined in article                   the Engagement With the Title Company:
9.02(n) and in Rule P-1(f) is synonymous with or could                  While the technical distinction made under article
be more accurately described as "closing the title               9.02(n) and Procedural Rule P-22(f) is often blurred in
insurance transaction." It is not the same as "closing           existing practice, it is recommended by the author that
the real estate escrow transaction." In consideration            consideration be given in the drafting of the P-22
for "closing the transaction" within the technical               schedule of charges letter (or in the fee attorney
meaning of the statute and Procedural Rule P-1(f) [i.e.,         contract as applicable) to recognize this distinction by
closing the title insurance transaction], the fee attorney       defining the servic es performed by the fee attorney or
or closing attorney receives a portion of the title              closing attorney for the title insurance company or title
insurance premium. The language of article 9.30 of the           insurance agent in the language of article 9.02(n) and
Texas Title Insurance Act and Procedural Rule P-22               Procedural Rule P-1(f). See discussion draft of P-22
only allow the title insurance premium to b shared
                                                 e               Letter attached as Exhibit B to Appendix for reference.
with an attorney who actually rendering services "in             Among other benefits, following such a convention
connection with title examination or closing a                   conforms the description of services of the fee attorney
transaction."                                                    or closing attorney to the statutory and regulatory
      Article 9.02(n) and Procedural Rule P-1(f)                 restrictions on sharing the title insurance premium.
carefully define "closing the transaction" to not include               In addition to avoiding a possible suggestion of a
the actual mechanical acts of closing the real estate            statutory or regulatory violation of the anti-rebate
escrow transaction (i.e., settlement or escrow services).        prohibition, the benefit of such an approach to the fee
Thus, under the language used in the statutory and               attorney or closing attorney is to define clearly and
regulatory definition of "closing the transaction," there        thereby limit the scope of engagement on behalf of the
is a sharp distinction drawn between an "investigation           title insurance company or title insurance agent. From
made on behalf of a title insurance company" prior to            the perspective of the title insurance company or title
issuance of the policy "to determine" whether certain            insurance agent, conforming the P-22 letter to the
events have occurred (e.g., execution of documents,              statutory and regulatory definition at least allows later
prorations, recording, etc.) and the actual performance          argument that actionable conduct by a closing attorney
of those acts. Paragraph (F) of Procedural Rule P-22             in the closing of the real estate escrow closing, as
further confirms this distinction by separately listing          distinguished from "closing the transaction" (i.e.,
the functions of "settlement, closing, and/or                    closing the title insurance transaction), is not
examination," which indicates that these are three               attributable to or imputed to the title insurance
different activities.                                            company or title insurance agent.
      Applicable case law also confirms that the                        The discussion draft of a P-22 letter attached as
issuance of the title insurance policy is a separate and         Exhibit B in the Appendix follows this suggestion.
distinct transaction from the closing of the real estate                It is important, if for no other reason than to
transaction. Chicago Title Ins. Co. v. Alford, 3 S.W.3d          reduce the risk of confusion, to have a clear written
164, 167 f.2 (Tex.App.-Eastland,1999); See Southwest             agreement defining the scope of the attorney’s
Title Insurance Company v. Northland Building                    engagement. This admonitio n applies equally to the
Corporation, 552 S.W.2d 425, 428 (Tex.1977); see                 attorney-client relationship that arises from the
also "Garrett and McDaniel: DTPA Liability For                   attorney's acceptance of a portion of the title insurance
Issuance of a Title Insurance Commitment," 26 TEX.               premium for services rendered to the title insurance
TECH L. REV. 857, 863-870 (1995).                                company in connection with the title examination
      For the service of closing the real estate escrow          and/or closing the transaction.
transaction, and performing the functions of an escrow                  As previously stated, Rule P-22 requires that the
agent, the fee attorney or closing attorney typically            fee attorney and closing attorney already have on file
charges and receives a separate escrow fee or                    with the title insurance company a written schedule of
settlement fee from the seller and buyer that is not             charges normally imposed by the attorney. There is no
shared with the title insurance company. This separate           Texas Department of Insurance promulgated form for
and additional fee is shown on line 1101 of the HUD-1            this written schedule of charges, which is usually
Settlement Statement as "Settlement or closing fee."             referred to simply as a "P -22 letter." In the case of

                                                             4
Fee Attorneys                                                                                                     Chapter 48

many, if not most closing attorneys, the P-22 letter is          "review of survey" or "review of loan documents"
the only written document describing the relationship            or other activities that the fee attorney or closing
between the closin g attorney and the title company.             attorney does not in fact perform for the title
        In actual practice P-22 letters tend to be rather        insurance company, then the fee attorney or
simple documents and rarely are they given much                  closing attorney is inviting potential liability if
scrutiny until a transaction participant makes a post-           there is something amiss with the survey, the loan
closing claim. It is strongly suggested that the attorney        documents, etc. Avoid loose language in the P-22
operating under a P-22 letter pay close attention to the         letter that is inaccurate and may unnecessarily
form of the letter used. This should be done at the              increase the attorney's exposure to transaction
outset of the relationship between the fee attorney or           participants. If a specific service is listed in the P-
closing attorney and the title insurance company, and            22 letter, it will be difficult for the fee attorney or
not for the first time when a transaction partic ipant           closing attorney to convince a court or jury later
makes a post-closing claim.                                      that the language was a "mistake" or that the
     From the perspective of the fee attorney or closing         particular service listed was not actually within
attorney, the issues arising with a P-22 letter that need        the actual scope of services for the transaction that
to be considered at a minimum include the following:             has generated a post-closing claim.

(i)   Does the P-22 letter mistakenly describe your              (iv) Does the P-22 letter specifically identify the tit le
      services broadly in the language of Rule P-22 as                company as the party for whom the services are
      "examination of a title and/or closing a                        being performed?
      transaction"?                                                   The fee attorney or closing attorney should
      Are you really "examining title"?           This is        make sure that the P-22 letter clearly states that
normally done by the title company's examination or              the services are performed for the title insurance
plant personnel or by in-house counsel for the title             company or title insurance agent. Care should be
company. If you are not actually examining title, then           taken to make sure that the P-22 letter does not
the P-22 letter should not include title examination             leave any ambiguity on this point. It is the
within the scope of service for which you are receiving          recommendation of the author that the P-22 letter
a portion of the title insurance premium. Confirming             specifically state that the services are not being
that Schedule C items on the Commitment for Title                performed for other transaction participants.
Insurance have been satisfied is not the same as
"examination of a title." See definition of "title               D. The Importance of Proper Completion of the
examination" contained in article 9.02(m)["the search                 Form T-00 Verification of Services Rendered
and examination of a title to determine the conditions                Procedural Rule P-22 requires that the fee
of the title to be insured and to evaluate the risk to be        attorney or closing attorney present to the title
undertaken in the issuance of the title insurance policy         company:
or other title insurance form"].
      If your P-22 letter setting forth your schedule of              at or prior to the time of payment of said
charges "normally imposed" includes "examination of                   services, a written itemized statement or
title" in the list of services and sets your premium split            invoice which clearly sets forth in detail the
at 50%, but you do not actually examine title, will a                 actual services rendered and billed for in
50% split still be sustainable as commensurate with the               representing the Company in the respective
services actually rendered in the event that your                     settlement, closing and/or examination, and
charges later come under scrutiny?                                    such Company verifies, in writing, that such
                                                                      services were actually rendered in
(ii) Does the P-22 letter describes your services only                accordance with form T-00; . . .
     as "closing services" or some other similarly
     vague term?                                                      Form T-00 Verification of Services Rendered is
     The risk here is that the meaning of such                   promulgated by the Texas Department of Insurance
vague terminology is left to later determination                 and is included in the Basic Manual [see copy of
and possible misconstruction by a court or jury.                 promulgated Form T-00 Verification of Services
                                                                 attached as Exhibit C-1 to the Appendix for reference].
(iii) Does the P-22 letter mistakenly describes services              In completing the Form T-00 Verification of
      beyond the scope of "examination of a title and/or         Services, the fee attorney or closing attorney should
      closing a transaction"?                                    keep in mind the same admonitions that apply to the P-
      If the P-22 letter contains a laundry list of              22 letter, because they apply equally to the language
various services including statements such as                    used by the fee attorney or closing attorney in

                                                             5
Fee Attorneys                                                                                                   Chapter 48

completing the Form T-00 Verification of Services                (iii) Does the description of services in the completed
Rendered. As with the P-22 letter, scant attention is                  Form T-00 Verification of Services go too far?
sometimes given to the process of completing the Form                  The completed Form T-00 Verification should not
T-00 Verification of Services Rendered until a post-             mistakenly describe services outside the scope of those
closing claim is made by a transaction participant and           actually rendered and "billed for in representing the
the language used first comes under scrutiny. Poorly             [title insurance company] in the respective settlement,
formulated language used by a fee attorney or closing            closing and/or examination." See Procedural Rule P-
attorney in completing the Form T-00 Verification of             22(F).
Services Rendered (or standard language inserted by a                  Care should be taken to ensure that the completed
title company employee and accepted without scrutiny             Form T-00 Verification, in an effort to provide the
by the fee attorney or closing attorney) can result in           required detail or justify the charges made, does not
ambiguity and later misconstruction by a court or jury           mistakenly include statements such as "review survey"
with respect to the existence and scope of the legal             or "review of loan documents" or "preparation and
representation of the fee attorney or closing attorney.          review of closing documents for buyer and seller" or
Additionally, because most, if not all, of the benefits of       other generic descriptions of services and activities that
a tightly drawn P-22 letter or other engagement letter           the fee attorney and closing attorney do not in fact
can be destroyed by a poorly completed Form T         -00        perform in representing the title company within the
Verification of Services Rendered, it is recommended             scope of "settlement, closing and/or examination."
that careful attention be given by the fee attorney and                In the same vein, the completed Form T-00
closing attorney to the language used in completing the          Verification of Services should not include services
Form T-00 Verification of Services Rendered.                     that the fee attorney or closing attorney may perform
      Among the basic questions that should be                   for a transaction participant other than the title
considered by the fee attorney or closing attorney in            insurance company or title insurance agent. This
completing the Form T     -00 Verification of Services           admonition would extend to the statements such as
Rendered are the following suggestions:                          "prepare earnest money contract" or "prepare closing
                                                                 documents" or "prepare deed, etc." or other similar
(i)   Does the completed Form T-00 Verification of               type statements. The fee attorney or closing attorney is
      Services describe accurately the services that were        not receiving a portion of the title insurance premium
      actually rendered by the fee attorney or closing           for these activities. The question of who a "doc prep"
      attorney?                                                  attorney is or may be representing is discussed
      Procedural Rule P-22(F) imposes this requirement           separately below in this presentation.
of describing the "actual services rendered." At a                     A fee attorney or closing attorney does not want
minimum, the fee attorney or closing attorney should             to become liable or make his title company client liable
not list "examination of title" on the Form T-00                 to a transaction participant by reason of mistakenly
Verification unless this services is actually being              included or unclear language used in completing the
rendered by the fee attorney or closing attorney to the          Form T-00 Verification of Services Rendered.
title company. Because the fee attorney or closing
attorney is signing and submitting this document to his          (iv) Should the completed Form T-00 Verification of
or her title insurance client, inaccuracy also has serious             Services Rendered include "settlement services"
ethics implications.                                                   or "escrow services" or some breakdown of those
                                                                       kinds of settlement services in the description of
(ii) Does the completed Form T-00 Verification of                      services actually rendered?
     Services set forth sufficient detail regarding the                Texas Title Insurance Act article 9.30 and
     services?                                                   Procedural Rule P-22 authorize sharing the title
     Procedural Rule P-22(F) requires that the                   insurance premium with a fee attorney or closing
completed Form T-00 Verification "clearly set forth in           attorney for services actually rendered "in connection
detail" the services actually rendered. Aside from the           with title examination or closing a transaction."
problems of ambiguity and later misconstruction by a             "Closing the transaction" is a defined term by statute
court or jury presented by cursory descriptions such as          and administrative rule that does not include
"closing services" or some other similarly vague term,           "settlement" services. See discussion above in section
these general statements, while often used, would not            III (B) of this presentation. Thus, there is no stated
appear to meet the requirement in Procedural Rule P-             statutory authorization for sharing the title insurance
22(F) that the services actually rendered be set forth           premium with the fee attorney or closing attorney for
"in detail."                                                     the performance of "settlement" services. The service
                                                                 of "settlement" is not listed in the article 9.30
                                                                 authorization (exemption) that allows sharing the title

                                                             6
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insurance premium with the fee attorney or closing               E.   Suggested Descriptive Model of the Fee
attorney.                                                             Attorney or Closing Attorney Relationship:
      However, the language used later in Procedural                  The fee attorney and closing attorney should
Rule P-22(F) draws a distinction between "settlement,            consider the following (which is only the author's
closing and/or examination" in stating the requirements          recommendation) as the preferred description of the
for completion of the Form T-00 Verification of                  true relationship between the fee attorney or closing
Services Rendered. Procedural Rule P-22(F) requires a            attorney and the title insurance company or the title
detailed description of "the actual services rendered            insurance agent and the other transaction participants:
and billed for in representing the Company in the
respective settlement, closing and/or examination."              (a) By receiving a portion of the title insurance
Therefore, if the fee attorney or closing attorney in fact            premium, the fee attorney or closing attorney
represents the title company in performing settlement                 steps into an attorney-client relationship with the
services and such services are "billed for," then they                title insurance company. This seems clear under
are required to be detailed in the completed Form T-00                Opinion 408. The fee attorney and the closing
Verification of Services.                                             attorney should treat the fee attorney contract or
      The dilemma is that it is unclear whether the fee               the P-22 schedule of charges letter with the same
attorney or closing attorney may lawfully receive a                   care and attention as any other engagement letter
portion of the title insurance premium for performing                 setting forth the attorney-client relationship
the "settlement" as distinguished from "closing the                   between the attorney and a client.
transaction." Procedural Rule P     -22(F) appears to be         (b) The premium split received by the fee attorney or
subject to an interpretation that "settlement" services               closing attorney from the title insurance company
should be included in the description of "the actual                  is only for "closing the transaction" in the purely
services rendered" on the completed Form T-00                         technical sense of those words; that is, closing the
Verification of Services if the title insurance company               title insurance transaction by undertaking the
is billed an additional separate charge (over and above               "investigation" for the title insurance company or
the premium split) for such settlement services, which                title insurance agent that is described in article
would be an extremely rare event in actual custom and                 9.02(n) and Procedural Rule P-1(f). In "closing
practice.      Alternatively, the settlement services                 the transaction," the fee attorney or closing
performed by the fee attorney or closing attorney might               attorney is only representing the title insurance
be considered as bein g paid for in whole by the                      company and none of the other transaction
settlement fee charged the seller and buyer, with the                 participants. The P-22 schedule of charges letter
fee attorney or closing attorney also representing the                used by the fee attorney or closing attorney should
title insurance at no additional charge. As another                   confirm these matters and should affirmatively
alternative, the fee attorney or closing attorney may be              disclaim representation of other transaction
viewed as performing settlement services (the escrow                  participants in "closing the transaction."
function) solely for the transaction participants other           (c) The fee attorney or closing attorney is not
than the title insurance company.                                                                                y
                                                                      examining title, which is really done b the title
     There is no one correct formulation of language to               insurance company's title examination or title
be used in completing the Form T-00 Verification of                   plant staff or by in-house underwriting counsel
Services Rendered. In the experience of the author, the               employed by the title insurance company. The P-
language used in completing the Form T-00                             22 letter used by the fee attorney or closing
Verification of Services varies widely from one fee                   attorney should specifically disclaim any
attorney or closing attorney to another and from one                  responsibility by the fee attorney to examine title
title company to another. There are a number of                       for the title insurance company or any other
different considerations and issues that enter into the               transaction participant. This same admonition
analysis of the proper descriptive language to be used,               applies to the process of completing the Form T-
and some of the issues are not clearly resolved either                00 Verification of Services.
by the statute, the Basic Manual, of existing custom             (d) The settlement services undertaken by the fee
and practice in the industry.              The primary                attorney or closing attorney are performed for the
consideration, however, should be for the fee attorney                separate settlement fee paid by the buyer and
or closing attorney to consider carefully the language                seller and separately charged on the settlement
used in completing the Form T-00 Verification of                      statement; that is, no portion of the title insurance
Services to ensure accuracy and to consider the                       premium is paid to the fee attorney or closing
potential impact of the language used in the event a                  attorney for settlement services. Alternatively, if
transaction participant makes a post-closing claim.                   the fee attorney or closing attorney is performing
                                                                      settlement services for the title insurance company

                                                             7
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    or title insurance agent, these are performed at no            IV. REPRESENTATION                 BY     THE       FEE
    additional charge to the title insurance company                     ATTORNEY OR CLOSING ATTORNEY OF
    or title insurance agent.                                            MULTIPLE PARTICIPANTS IN THE REAL
(e) In performing "settlement" services (as                              ESTATE TRANSACTION
    distinguished from "closing the transaction" for                     The Texas Disciplinary Rules of Professional
    the title insurance company), the fee attorney or              Conduct allow an attorney to represent multiple clients
    closing attorney is acting as an escrow agent for              with adverse interests under certain specified
    the seller, buyer, and, if applicable, borrower and            conditions. Prior ethics opinions also support the
    lender. The relationship of escrow agent to these              common practice of multiple client representation by
    parties is a separate and distinct relationship from           fee attorneys and closing attorneys.
    the attorney-client relationship existing between                    Ethics Opinion 359 issued in December 1971 by
    the fee attorney or closing attorney and the title             the Professional Ethics Committee of the Supreme
    insurance company and the attorney-client                      Court examined the issue of whether a law firm could
    relationship perhaps existing between the fee                  permissibly represent the lender and the title insurance
    attorney or closing attorney and other transaction             company. A member of the law firm was the president
    participants. The fiduciary duties owed by an                  of the lender. Another member of the law firm closed
    escrow agent to the parties to the real estate                 the transactions. The law firm prepared the loan
    transaction are discussed in numerous Texas                                                                 h
                                                                   documents used in the transaction, with t e costs of
    cases. See Bell v. Safeco Title Ins. Co., 830                  preparation paid by the borrowers at closing. Opinion
    S.W.2d 157, 160 (Tex.App.--Dallas 1992, writ                   359 allows the joint representation, assuming that full
    denied); Boatright v. Texas Am. Title Co., 790                 disclosure is made to both clients and that both clients
    S.W.2d 722, 728 (Tex.App.--El Paso 1990, writ                  agree to the joint representation.
    dism'd);      Chilton v. Pioneer National Title                      Ethics Opinion 408 issued in 1984 simila rly
    Insurance Company, 554 S.W.2d 246, 249                         recognizes the propriety of multiple representation,
    (Tex.Civ.App.--Waco 1977, writ ref'd n.r.e.).                  including representation of the title company, so long
(f) The fee attorney or closing attorney may also                  as the general rules applicable to multi-client
    represent in the capacity of an attorney another               representation are adhered to by the attorney. The full
    transaction participant in performing legal                    text of Ethics Opinion 408 is attached as Exhibit D to
    services in connection with the real estate                    the Appendix for reference.
    transaction or loan transaction. The fee attorney                    Multiple representation of the title insurance
    or closing attorney may charge separately for such             company and another transaction participant by the fee
    legal services. The requirements of disclosure and             attorney or closing attorney is fairly common.
    consent to multiple client representation in a real            However, like many common practices in the industry
    estate transaction would, of course apply in the               that have developed over time, a review of the
    event of multiple client representation. These                 applicable rules and requirements is useful and
    requirements are discussed separately in the next              important to ensure continued compliance by the fee
    section of this presentation                                   attorney or closing attorney with the governing ethics
                                                                   rules.
      The discussion form of the Rule P-22 schedule of                   The reader is recommended to the website
charges letter attached as Exhibit B to the Appendix               maintained by the Texas Center for Legal Ethics and
and the discussion sample of completed Form T           -00        Professionalism       that     can    be    found      at
Verification of Services attached as Exhibit C-2 to the            http://www.txethics.org/. The Center's website has the
Appendix are based upon this suggested model of the                Disciplinary Rules, Ethics Opinions, and other
relationship of the fee attorney to the title insurance            materials available in searchable format.
company and the other transaction participants.
      In summary, the fee attorney or closing attorney             A. Rule 1.06 Conflict of Interest: General Rule
should give careful attention to the P-22 schedule of                   The present rule governing multiple client
services letter and the completed Form T-00                        representation is found in Rule 1.06 of the Texas
Verification of Services to ensure that both documents             Disciplinary Rules of Professional Conduct, which
accurately describe the actual services rendered by the            states as follows in pertinent part:
fee attorney or closing attorney in representing the title
insurance company or title insurance agent. The same               (a) A lawyer shall not represent opposing parties to the
care and attention should be given to the fee attorney                  same litigation.
contract or, if there is one in addition to the P-22 letter,       (b) In other situations and except to the extent
the closing attorney contract.                                          permitted by paragraph (c), a lawyer shall not


                                                               8
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     represent a person if the representation of that              When       representing      multiple     transaction
     person:                                                 participants, such as the title insurance company and
                                                             the seller or buyer, the fee attorney or closing attorney
     (1) involves a substantially related matter in          should pay particularly close attention to the
          which that persons interests are                   admonition that disclosure and consent are not mere
          materia lly and directly adverse to the            formalities. Comment 8 confirms that there is not a
          interests of another client of the lawyer          requirement that disclosure and consent be written. In
          or the lawyers firm; or                            the opinion of the author, however, it is foolish not to
     (2) reasonably appears to be or become                  document the required disclosure and consent in
          adversely limited by the lawyers or law            writing, and this does appear to be standard practice.
          firm's responsibilities to another client                With respect to the required disclosure and
          or to a third person or by the lawyer's or         consent to be obtained by the fee attorney or closing
          law firm's own interests.                          attorney from the title insurance company or title
                                                             insurance agent, this can be accomplished, as discussed
(c) A lawyer may represent a client in the                   above, in the fee attorney contract or in the P-22
    circumstances described in (b) if:                       schedule of charges letter. Given the relative level of
                                                             sophistication of the title insurance company or title
     (1) the lawyer reasonably believes the                  insurance agent compared with other clients, the same
         representation of each client will not be           level of disclosure and consent that would be
         materially affected; and                            appropriate for an unsophisticated lay client is
     (2) each affected or potentially affected               presumed unnecessary. With that said, however, the
         client consents to such representation              fee attorney or closing attorney should always err on
         after full disclosure of the existence,             the side of full disclosure and consent, bearing in mind
         nature, implications, and possible                  the later scrutiny that will come in the event of a post-
         adverse consequences of the common                  closing claim made by a transaction participant.
         representation and the advantages                         With respect to the required disclosure and
         involved, if any.                                   consent to be obtained from the non-title company
                                                             transaction participant who will also be represented by
     DR 1.06(c) imposes a two-step procedure. First,         the fee attorney or the closing attorney, the Real Estate
the attorney must first make his or her own                  Forms Committee of the State Bar of Texas does
determination, which is subject to a standard of             include in the Texas Real Estate Forms Manual a basic
reasonableness, that the representation of each client       example of a "Letter Disclosing and Requesting
will not be "materially affected" by the joint or            Waiver of Potential Conflict for Multiple
multiple representation. Second, the attorney must           Representation of Title Company and Third Party."
make full disclosure to the affected or potentially          See Form 1-3, Texas Real Estate Forms Manual. It
affected clients and obtain consent to the joint or          should be borne in mind that State Bar Form 1 is      -3
multiple representation. It is very important to             intended only as a "basic example" and the attorney is
remember that DR1.06(c)(2) sets forth two                    specifically cautioned to tailor the details of the letter
requirements--disclosure and consent.                        to the particular transaction and circumstances. In the
                                                             opinion of the author, simply copying State Bar Form
B.   Disclosure and Consent to Multiple Client               1-3 and not providing substantial additional detail to
     Representation                                          complete the required disclosure to the level
     Comment 8 to DR 1.06 confirms that the                  contemplated by DR 1.06(c) and comment 8 to the rule
requirements of disclosure and consent are not mere          is risky for the fee attorney or closing attorney.
formalities:                                                       A reference copy of Form 1-3 (Letter Disclosing
                                                             and Requesting Waiver of Potential Conflict for
     8. Disclosure and consent are not                       Multiple Representation of Title Company and Third
     formalities. Disclosure sufficient for                  Party) from the Texas Real Estate Forms Manual is
     sophisticated clients may not be sufficient to          attached as Exhibit E to the Appendix for reference and
     permit less sophisticated clients to provide            discussion.
     fully informed consent. While it is not                       In some transactions a serious dispute develops
     required that the disclosure and consent be in          prior or at closing between the transaction participants.
     writing, it would be prudent for the lawyer to          If a conflict develops in the multiple client
     provide potential dual clients with at least a          representation after the joint representation has
     written summary of the cons iderations                  commenced by the fee attorney or clos ing attorney,
     disclosed.                                              then the attorney must withdraw from the

                                                         9
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representation of one or more of the multiple clients to         representation. The case of Burnap v. Linnartz, 914
the extent necessary to cure the conflict. This ethics           S.W.2d 142, 148-9 (Tx.App.--San Antonio 1995, writ
requirement is stated in DR 1.06(e) as follows:                  denied), sets forth the applicable rules:

     (e) . . . if multiple representation p roperly                         Absent fraud or collusion, an attorney
     accepted becomes improper under this Rule,                       owes a duty only to those parties in privity of
     the lawyer shall promptly withdraw from one                      contract with the attorney. Berry v. Dodson,
     or more representations to the extent                            Nunley & Taylor, P.C., 717 S.W.2d 716, 718
     necessary for any remaining representation                       (Tex.App.--San Antonio 1986), judgm't
     not to be in violation of these Rules.                           vacated by agr., 729 S.W.2d 690 (Tex.1987).
                                                                      Thus a non-client generally has no cause of
     Further, in the unfortunate event that a dispute                 action against an attorney for negligent
develops between the transaction participants who                     performance of legal work. Parker v.
have been jointly represented by the fee attorney or                  Carnahan, 772 S.W.2d 151, 156 (Tex.App.--
closing attorney, the fee attorney or closing attorney                Texarkana 1989, writ denied). An attorney-
may not represent any of the parties in the dispute in                client relationship may be implied in some
the absence of further disclosure and consent. This                   cases from the conduct of the parties. E.F.
requirement is set forth in DR 1.06(d) as follows:                    Hutton v. Brown, 305 F.Supp. 371, 388
                                                                      (S.D.Tex.1969); Duval County Ranch Co. v.
     (d) A lawyer who has represented multiple                        Alamo Lumber Co., 663 S.W.2d 627, 633
     parties in a matter shall not thereafter                         (Tex.App.--Amarillo 1983, writ ref'd n.r.e.).
     represent any of such parties in a dispute                             Even in the absence of an attorney-client
     among the parties arising out of the matter,                     relationship, an attorney may be held
     unless prior consent is obtained from all such                   negligent for failing to advise a party that he
     parties to the dispute.                                          is not representing the party. Kotzur v. Kelly,
                                                                      791 S.W.2d 254, 258 (Tex.App.--Corpus
     In representing the Title Company and another                    Christi 1990); Parker v. Carnahan, 772
transaction participant, the fee attorney or closing must             S.W.2d at 157.Generally such negligence
take care in making full disclosure and obtaining                     cannot be established in the absence of
meaningful consent to the multiple client                             evidence that the attorney knew the party had
representation. As in most situations, the lack of clear              assumed that he was representing them in a
and sometimes necessarily blunt communication at the                  matter. See Dillard v. Broyles, 633 S.W.2d
outset of the relationship sows the seeds for later                   636, 643 (Tex.App.--Corpus Christi 1982,
misunderstanding and risk for the fee attorney or                     writ ref'd n.r.e.), cert. denied, 463 U.S. 1208,
closing attorney.                                                     103 S.Ct. 3539, 77 L.Ed.2d 1389 (1983). If
                                                                      circumstances lead a party to believe that
C. Disclosure of Non-Representation to Non-                           they are represented by an attorney,
     Client Transaction Participants                                  however, the attorney may be held negligent
     Strictly speaking, DR 1.06(c) only requires                      for failing to advise that party of the
disclosure and consent for clients. For the fee attorney              attorney's non-representation. E.F. Hutton
or closing attorney who is conducting a volume of                     v. Brown, 305 F.Supp. at 396; Parker v.
residential transactions in which the fee attorney o    r             Carnahan, 772 S.W.2d at 157; Rice v.
closing attorney is representing the title insurance                  Forestier,      415      S.W.2d     711,    713
company and also the seller, and the buyers usually are               (Tex.Civ.App.--San Antonio 1967, writ ref'd
not represented by an attorney, the fee attorney has the              n.r.e).     The factfinder must determine
additional challenge of making sure that the buyer is                 whether the attorney was aware or should
not inadvertently misled into believing that he or she is             have been aware that his conduct would
also represented by the fee attorney or closing attorney.             have led a reasonable person to believe that
There are numerous other transaction scenarios in                     the attorney was representing that person.
which unrepresented transaction participants might                    Parker v. Carnahan, 772 S.W.2d at 157.
easily be led into mistaken beliefs regarding the                     (emphasis added)
existence and scope of legal representation.
     The applicable Texas case law recognizes that an                 In dealing with unrepresented transaction
attorney can be liable to a non-client for legal                 participants, there are additional ethics rules that must
malpractice if, in certain circumstances, the attorney           be kept in mind by the fee attorney or closing attorney.
fails to advise the non-client of the absence of                 There is a basic requirement of truthfulness in

                                                            10
Fee Attorneys                                                                                                    Chapter 48

communicating with third parties that every attorney              of common prudence to advise all other transaction
must meet. This requirement is set forth in Rule 4.01             participants that they are not represented by the fee
of the Texas Disciplinary Rules of Professional                   attorney or closing attorney, again, preferably in
Conduct:                                                          writing.
4.01 Truthfulness in Statements to Others
    In the course of representing a client a                      V.   CONCLUSION
lawyer shall not knowingly:                                            Fee attorneys and closing attorneys are confronted
                                                                  with numerous statutory, regulatory, and ethics
     (a) make a false statement of material fact                  requirements. Careful attention must be paid to these
         or law to a third person; or                             requirements to avoid enhancing the risks of ethics
                                                                  violations or other liability to participants in the real
     (b) fail to disclose a material fact to a third              estate transaction. By taking the time to think through
         person when disclosure is necessary to                   and analyze the ethics and liability issues, always
         avoid making the lawyer a party to a                     keeping in mind the different roles played by the fee
         criminal act or knowingly assisting a                    attorney or closing attorney and the different statutory,
         fraudulent act perpetrated by a client.                  regulatory, common law, and ethics duties that are
                                                                  owed to the various transaction participants, the fee
     Additional requirements for dealing with an                  attorney or closing attorney can prudently manage
unrepresented transaction participant are set forth in            these risks.
Rule 4.03 of the Texas Disciplinary Rules of                               This process of analysis should be undertaken
Professional Conduct:                                             in advance and not for the first time after a transaction
                                                                  participant has made a post-closing claim. Particularly
4.03 Dealing With Unrepresented Person                            close scrutiny must be given by the fee attorney or
      In dealing on behalf of a client with a person who          closing attorney to the key documents that establish
is not represented by counsel, a lawyer shall not state           and define the attorney-client relationship with the title
or imply that the lawyer is disinterested. When the               insurance company or title insurance agent.
lawyer knows or reasonably should know that the                   Additionally, the fee attorney or closing attorney must
unrepresented person misunderstands the lawyer's role             comply with the disciplinary requirement of full
in the matter, the lawyer shall make reasonable efforts           disclosure and consent in the event of multiple client
to correct the misunderstanding.                                  representation. Extra care is also important to ensure
      The Real Estate Forms Committee of the State                that non-client transaction participants do not
Bar of Texas has included in the Texas Real Estate                mistakenly believe that they are represented by the fee
Forms Manual a sample form of non-representation                  attorney or closing attorney.
letter for use when the attorney is representing the title
                                 -10
company or a lender. Form 1 (Nonrepresentation
Letter When Representing Lender of Title Company)
from the Texas Real Estate Forms Manual is attached
as Exhibit F to the Appendix for reference and
discussion. As with Form 1-3 discussed above, Form
1-10 must be regarded only as a starting point. The
specifics of the particular transaction must always be
taken into account in deciding whether or not a specific
form is suitable for use by the fee attorney or closing
attorney.

D. Summary of Requirements
     In light of the requirements of DR 1.06(c) and the
applicable case law that extends potential malpractice
exposure to claims by non-clients who mistakenly
believe they are represented by an attorney, which is
needless to say determined by a court or jury after the
fact, the fee attorney or closing attorney is (a)
mandated by the disciplinary rules to make full
disclosure and obtain consent to joint representation
from all actually or potentially affected clients,
preferably in writing, and (b) required by the dictates

                                                             11
Fee Attorneys                                                                                 Chapter 48

                                             APPENDIX

A : Texas Title Insurance Basic Manual Procedural Rule P-22

B : Sample Procedural Rule P-22 Schedule of Charges ("P -22 Letter")

C-1:Promulgated Form T-00 “Verification of Services Rend ered”

C-2:Discussion Draft Completed Form T-00 "Verification of Services Rendered"

D: Ethics Opinion No. 408 (1984)

E: State Bar Form 1-3 (Letter Disclosing and Requesting Waiver of Potential Conflict
   for Multiple Representation of Title Company and Third Party)

F: State Bar Form 1-10 (Nonrepresentation Letter When Representing Lender or Title Company)




                                                  12
Fee Attorneys                                                                                                    Chapter 48

                                              APPENDIX – EXHIBIT A

                                TEXAS TITLE INSURANCE BASIC MANUAL
                                       PROCEDURAL RULE P-22

P-22. Payment of a Fee for Examination and/or Closing -

     No payment shall be made by a Title Insurance Company, Title Insurance Agent, Escrow Officer or any
employee or agent of any of them, to any Person who is not its bona-fide employee, for examination of a title and/or
closing a transaction unless:

(A) Such Person is (i) a Title Insurance Company as defined in Article 9.02, Insurance Code, and qualified to do
business in the State of Texas, (ii) a Title Insurance Agent as defined in Article 9.02, Insurance Code, and licensed to
do business in the State of Texas by the Texas Department of Insurance, or (iii) an attorney at law duly licensed by
the Supreme Court of Texas to practice law in the State of Texas, to the extent not inconsistent with Article 9.34,
Texas Insurance Code, or (iv) any Person legally authorized to perform such services; and

(B) Such Person has performed all of the services described in P-1, paragraph f, that such Person is legally authorized
to perform, and/or the examination of the title required for the issuance of a commitment for title insurance prior to
the issuance of any such commitment, construction binder, policy or other contract of title insurance, to determine the
condition of the title to be insured. If the parties to the transaction are located in different counties, this paragraph of
this rule does not prohibit payment to a Person who has actually performed all the services described in P-1,
paragraph f in relation to either (i) the seller(s) or the buyer(s) or (ii) the mortgagor(s) or the mortgagee(s) for closing
the transaction and issuance of the policy; and

(C) Timely disclosures of such payment have been made as required by Rule P-21 and Article 9.53; and

(D) Any payment made must be commensurate with the services actually performed; and

(E) The Person rendering the service shall have filed with the Company at least thirty (30) days prior to the rendering
of such service a written schedule of charges normally imposed by such Person for such services (Schedule) and such
Schedule shall have been agreed to and approved by the Company as being reasonable charges for such services.
However, payments to licensed title insurance agents are excluded from the requirements of this paragraph (E); and

(F) The Person rendering the service shall have presented to the Company, at or prior to the time of payment of said
services, a written itemized statement or invoice which clearly sets forth in detail the actual services rendered and
billed for in representing the Company in the respective settlement, closing and/or examination, and such Company
verifies, in writing, that such services were actually rendered in accordance with form T-00; and

(G) In the event of collection of the title insurance premium by such Person, the entirety of such premium shall have
been remitted to the Company; and

(H) No portion of the charge for the services actually rendered shall be attributable to, and no payment shall be made
for the solicitation of, or as an inducement for the referral or placement of the title insurance business with the
Company; and

(I) Any portion of any payment inconsistent with the requirements hereof, or any payment by the Company to any
Person for the solicitation of, or as an inducement for the referral or placement of title insurance business, is deemed
to be a violation of Article 9.30; and

(J) The Company shall keep written itemized statements or invoices, and the Schedule, in its official records for a
period of three years and shall make such copies thereof available to the Texas Department of Insurance and its
representatives for inspection and duplication upon request.



                                                            13
   Fee Attorneys                                                                                       Chapter 48

                                            APPENDIX – EXHIBIT B

               DISCUSSION DRAFT OF RULE P-22 SCHEDULE OF CHARGES LETTER

                                       [LETTERHEAD OF ATTORNEY]

   Re: Schedule of Charges for "Closing the Transaction"

   Dear Title Company:

           In accordance with the requirements of Procedural Rule P-22 of the Texas Title Insurance Basic
   Manual, this letters sets forth my written schedule of charges normally imposed by me for "Closing the
   Transaction." As used in this letter, the term "Closing the Transaction" has the same meaning in this letter
   as defined in Texas Title Insurance Act article 9.02(n) and Procedural Rule P-1(f).

          My services in "Closing the Transaction" on your behalf are limited to the following specific
   services, unless otherwise specifically agreed in writing by me:

           The investigation on your behalf to determine proper execution, acknowledgment, and delivery of
           all conveyances, mortgages, and other title instruments which may be necessary to the
           consummation of the transaction. It also includes the determination that all delinquent taxes are
           paid, all current taxes, based on the latest available information, have been prorated properly
           between purchaser and seller (in the case of an Owner's Policy), the consideration has passed, all
           proceeds have been properly disbursed, a final search of the title has been made, and all necessary
           papers have been properly filed for record or properly delivered to the appropriate parties.

   LIMITATION ON MY SERVICES :

          A. In "Closing the Transaction" I am acting solely on your behalf and not on behalf of any seller,
   buyer, borrower, or lender.

         B.     I am not undertaking any examination of title for you. You shall be solely responsible for the
   examination of title and the determination of insurability of title in accordance with sound title
   underwriting practices as required by Texas Title Insurance Act article 9.34.

        C. [OPTIONAL: CHECK ONE ONLY]

        [___] I am not performing settlement or escrow services for you. Any settlement or escrow closing
services performed by me for the seller, buyer, borrower, and/or lender shall be subject to separate charge by
me, if any, made to one or more of those parties.

        [___] I am performing settlement or escrow services for you at no additional charge. I reserve the
right also to perform settlement or escrow closing services for the seller, buyer, borrower, and/or lender, which
shall be subject to separate charge by me, if any, made to one or more of those parties.

My fees for "Closing the Transaction" on your behalf are as follows:

1. ______% of the premium charged for title polices with a liability of less than $____________;
2. ______% of the premium charged for title polices with a liability of $____________ or more, but less than
   $____________;
3. ______% of the premium charged for title polices with a liability of $____________ or more, but less than
   $____________; and
                                                         14
   Fee Attorneys                                                                                    Chapter 48

4. ______% of the premium charged for title polices with a liability of $____________ or more.

   Pursuant to Procedural Rule P-22, please evidence your approval of my charges for "Closing the
Transaction" as being reasonable for such services by signing this Schedule of Charges.




   Sincerely,



   _________________________, ATTORNEY


   The schedule of charges for "Closing the Transaction" stated above is hereby approved as
   reasonable:

   TITLE INSURANCE COMPANY


   __________________________________              ___________________________

                                                   Date




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                                        APPENDIX – EXHIBIT C-1

            PROMULGATED FORM T-00 “VERIFICATION OF SERVICES RENDERED


                             VERIFICATION OF SERVICES RENDERED

G. F. No.       _________________

Pursuant to the requirements of Procedural Rules P-1.o. and P-22, the undersigned representative of
____________________________(Company issuing the Policy) hereby verifies that the following services
were actually rendered by ____________________(Person and firm affiliation rendering the service)

Date(s) services rendered _______________

Location services rendered     _______________

DETAILED DESCRIPTION OF SERVICES:




Percentage or amount of premium (remaining after remittance to the Title Insurance Company) agreed to
be paid to the person rendering service:

$__________________ or __________________%


______________________________                  _______________________
Signature of Person rendering service       Date


To Be Completed by Person Paying for Service

I, ___________________________________ agree, to the best of my knowledge, that the above
description of services rendered is accurate and complete and that the amount shown paid is correct.

______________________________              ________________________
Signature                    Date




                                                  16
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                                        APPENDIX – EXHIBIT C-2

     DISCUSSION DRAFT OF COMPLETED FORM T-00 “VERIFICATION OF SERVICES
                                RENDERED

                              VERIFICATION OF SERVICES RENDERED

G. F. No. 2002-100001

Pursuant to the requirements of Procedural Rules P-1.o. and P-22, the undersigned representative of OLD
STANDARD TITLE INSURANCE COMPANY (Company issuing the Policy) hereby verifies that the
following services were actually rendered by LAW OFFICES OF JOHN SMITH, P.C.

Date(s) services rendered: DECEMBER 5, 2002

Location services rendered: 1000 MAIN STREET, SAN ANTONIO, TEXAS.

DETAILED DESCRIPTION OF SERVICES:

THE FOLLOWING SERVICES ONLY: Investigation on behalf of the Company to determine
proper execution, acknowledgment, and delivery of all conveyances, mortgages, and other title
instruments which may be necessary to the consummation of the transaction. Determine that all
delinquent taxes are paid, all current taxes, based on the latest available information, have been
prorated properly between purchaser and seller (in the case of an Owner's Policy), the consideration
has passed, all proceeds have been properly disbursed, a final search of the title has been made, and
all necessary papers have been properly filed for record or properly delivered to the appropriate
parties. THESE SERVICES WERE RENDERED ONLY TO THE COMPANY AND NOT TO
ANY OTHER PARTY. NO TITLE EXAMINATION SERVICES INCLUDED.

Percentage or amount of premium (remaining after remittance to the Title Insurance Company) agreed to
be paid to the person rendering service:

$__________________ or __________________%


______________________________                   _______________________
Signature of Person rendering service        Date


To Be Completed by Person Paying for Service

I, ___________________________________ agree, to the best of my knowledge, that the above
description of services rendered is accurate and complete and that the amount shown paid is correct.

______________________________               ________________________
Signature                    Date




                                                     17
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                                           APPENDIX – EXHIBIT D


                                                 OPINION 408
                                                 January 1984

                 Tex. Comm. On Professional Ethics, Op. 408, V. 47 Tex. B.J. 44 (1984)

QUESTION PRESENTED

    Under what circumstances may an attorney representing a party to a real estate transaction accept a fee
consisting of a percentage of the title insurance premium from the title insurer?

DISCUSSION

     An attorney may accept a fee from the title insurance company if the attorney has actually performed
services on behalf of the company. Any fee arrangement with the title company would give rise to an attorney-
client relationship between the lawyer and the title company. The relationship would therefore be embraced
by all the relevant disciplinary rules. In this regard, the fee received by the attorney must be reasonable under
Disciplinary Rule (DR) 2-106, whether based on a percentage or some other mode of calculation.

     Since the arrangement causes the title company to become a client of the attorney, a situation of multiple
client representation is presented. Disciplinary Rule 5-105(A) and (B) provides that an attorney shall decline
employment or withdraw from employment if the multiple representation will, or is likely to, adversely affect
the exercise of the attorney's independent judgment on behalf of a client. On the other hand, such employment
may continue, despite DR 5-105(A) and (B), if it is obvious that the lawyer can adequately represent each
interest, and each client consents after full disclosure of the possible effects on the lawyer's representation of
the client interest. DR 5-105(C).

     Disciplinary Rule 5-105 requires disclosure if there is a likelihood of an adverse effect on the exercise of
the attorney's judgment. If the attorney sees such a likelihood, he should, of course, disclose it, but
circumstances may exist where a disclosure that the lawyer is also representing the title company is not only
advisable, but required at the outset or when the joint representation requires it.

    This opinion makes no interpretation of Article 9 of the Texas Insurance Code.

CONCLUSION

    An attorney representing a party to a real estate sale may accept a percentage of the title insurance
premium only for services actually rendered the title company. The attorney becomes the attorney of the title
company; the fee charged the title company should therefore be reasonable.

     The lawyer should make such disclosures to all his clients in the transaction as the rules and statutes may
require, depending on the facts in each situation, and is bound by the usual and customary rules of multi-
client representation as they apply to the particular facts at hand. (9-0.)




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                                               APPENDIX - EXHIBIT E

                            STATE BAR FORM 1-3
    LETTER DISCLOSING AND REQUESTING WAIVER OF POTENTIAL CONFLICT FOR
        MULTIPLE REPRESENTATION OF TITLE COMPANY AND THIRD PARTY

[Date ]

[Name and address of prospective client]

Re: [describe transaction]

[Salutation]

I am pleased that you are considering employing our firm in connection with the above-referenced transaction.
Although it is not common for a lawyer to represent more than one party in a transaction, dual representation is
permitted by professional ethics guidelines as long as two conditions are met.

First, the lawyer must conclude, after a good-faith self-evaluation, that the lawyer can adequately represent the
interests of each client. The multiple representation should not adversely affect the attorney's independent
professional judgment on behalf of any client. Second, all clients must consent to the multiple representation after
full disclosure is given by the lawyer.

The first condition has been satisfied because I believe that this firm can adequately represent each of you (although I
hope you understand that we must reserve the right to withdraw from this dual representation if later events cause me
in good faith to reach a different conclusion). This letter is intended to fulfill the second requirement mentioned
above, that of disclosure and consent. Accordingly, I will review some of the possible effects that dual representation
may have on you.

Conflicts of interest. If I determine that, because of differences between the parties, I can no longer represent each of
you impartially, I will inform you of the conflict, and I must then withdraw from representation. If this occurs, I will
no longer be able to represent any party to the transaction. Should I determine that this law firm must withdraw from
the representation, I will, if you wish, assist the parties in obtaining new counsel. You would, of course, be
responsible for payment of all accrued legal fees and any outstanding expenses. Likewise, I would return any unused
portion of any advances that had been made. The need to obtain substitute counsel may involve additional legal fees
and expenses.

Scope of employment. I am being hired solely to advise you on and document this real estate transaction. I am not
responsible for and will not advise you on other transactions, nor will I give either of you any kind of tax advice with
respect to this transaction. [Include additional disclaimers appropriate to the facts.]

Judgment calls. In all real estate closings, a seller or buyer must decide which title matters materially affect title to
the property. These decisions are often routine; however, on occasion they require my exercising professional
judgment in representing your sometimes competing interests. [Describe examples of possible judgment calls
appropriate to the facts.]

There are of course other potential problems that might develop. Although I assure you that I will try to act as fairly
as possible in judgment-call matters, it is certainly possible that one of you may not concur with my judgment.

Confidential information. During the course of any representation a lawyer generally becomes aware of confidential
information regarding the client. The confidentia l information may be a potential cloud on the title that one party
does not want revealed to the other party. Another possible confidential matter may be the financial capacity of a
party, which bears on the likelihood of that party's performance of its obligations.

Although I assure you that I will try to act discreetly within the bounds of fair dealing, it is certainly possible that
either or both of you would prefer to eliminate any possibility of having your confidential information known by an
                                                             19
Fee Attorneys                                                                                                 Chapter 48

attorney who is also representing the other party. Furthermore, neither of you will be protected by the attorney-client
privilege concerning any information disclosed to me or another lawyer in this firm during our representation. The
general rule is that, as between commonly represented clients, the privilege does not attach. Thus, confidential
information that would be protected by the attorney-client privilege if we represented only one of you can be
disclosed to the other party.

Of course, I would have declined the dual representation before now if I had not already concluded that I can
adequately represent both of you in this transaction; however, I also understand that you may feel differently.
Therefore, I would appreciate your giving careful thought to the matters discussed in this letter. If you consent to the
multiple representation, please sign in the space below and return this letter to me. You should keep a copy of this
letter for your records. I will be happy to answer any questions you might have.

                                 Sincerely yours,
                                 _________________________________________________
                                 [Name of attorney]

I understand this disclosure and I consent to the proposed multiple representation.

                                 _________________________________________________
                                 [Name of prospective client]
                                 Date:




                                                           20
Fee Attorneys                                                                                              Chapter 48

                                            APPENDIX - EXHIBIT F

                                 STATE BAR FORM 1-10
                     NONREPRESENTATION LETTER WHEN REPRESENTING
                              LENDER OR TITLE COMPANY

[Date ]

[Names and addresses of buyer and seller]

Re: [describe transaction]

[Salutation]

I have represented [name of lender or title company] in the preparation of legal documents for use in closing the
above-referenced transaction.

While I have acted solely on behalf of [name of lender or title company], [name ], the buyer, and [name ], the seller,
acknowledge that the legal fees incurred in preparing the legal documents will be paid by the buyer or the seller even
though I have not in any manner undertaken to assist or render legal advice to the buyer or the seller, except in the
preparation of the legal documents. The buyer and the seller further acknowledge and understand that they may retain
independent legal counsel to represent their individual interests in the referenced transaction.

The buyer and the seller specifically recognize that I do not have the responsibility to provide any truth-in-lending
disclosures, any other truth-in-lending documents, or any other documents required by any regulations that apply to
this transaction. The lender is responsible for providing those documents, and no charge may be made for providing
them.

Please sign below to acknowledge that you have been advised of my representation of the [lender/title company] and
that you understand that I am not your attorney.

                                Sincerely yours,
                                _____________________________________________
                                [Name of attorney]

                                Buyer:
                                ______________________________________________
                                [Name of buyer]
                                Date:

                                Seller:
                                ______________________________________________
                                [Name of seller]
                                Date:




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