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OBA Ethics Counsel

Ethics Opinion No. 131

Adopted February 26, 1937

The Board of Governors is in receipt of the following inquiry:

"Please advise: (a). Whether an attorney who is paid a stipulated yearly salary to represent a loan company in all of its legal matters, including prosecution of foreclosure suits, would violate rule 36 by collecting and turning over to his client the total attorney's fee collected in such foreclosure proceedings, where the amount collected per annum exceeds his annual salary. (b). If such conduct would be interdicted as to a private loan company, would the same rule apply to an attorney who represents the Home Owners Loan Corporation or the Commissioners of the Land Office of the State of Oklahoma?"

In response to (a):

The question is fully answered in Advisory Opinion No. 7, Vol. 1., Adv. Op. p. 19, in which such course of conduct is interdicted in contravention of rule 36 and of Cause 9 of the Causes for Disbarment which provides:

"That he has divided or agreed to divide fees for legal services with anyone other than another attorney entitled to practice law."

See also Hamilton v. Burgess, 233 Ala. 4, 170 So. 348 in which the Supreme Court of Alabama held that a stipulation in a note or mortgage, by which the debtor contracted to pay a certain amount as the attorney's fees of the creditor, is in reality a contract to pay the attorney only an amount actually and reasonably earned by him, not to exceed the amount stipulated. The court construed the stipulation to be a contract of indemnity merely, saving the creditor from loss by reason of the payment of a reasonable fee only. The court also held that "any agreement between the creditor and his attorney by which either is to collect under guise of attorney's fees more than the attorney is to receive for his services is oppressive, unlawful and void;" and that "any agreement between the creditor and his attorney to split fees is highly objectionable."

In response to (b): In the opinion of the Board of Governors, the rule is of universal application and applies to the Home Owners Loan Corporation or the Commissioners of the Land Office of the State of Oklahoma; but the law in this State has been declared otherwise. See ex rel. Mothershead v. Commissioners of Land Office, 135 Okl. 107, 274 P. 473.