Opinion ID: 2111125
Heading Depth: 2
Heading Rank: 1

Heading: Differing interests.

Text: The principle underlying Ethical Canon 5 is that a lawyer should not represent parties with differing interests. The term differing interests is defined in subsection (1) under the definitional section of the Iowa Code of Professional Responsibility. It includes every interest that will adversely affect either the judgment or loyalty of a lawyer to a client, whether it be a conflicting, inconsistent, diverse, or other interest. The differing interests need not be antagonistic. In re Pappas, 159 Ariz. 516, 523, 768 P.2d 1161, 1168 (1988). Furthermore, the mere possibility of an adverse effect upon the exercise of free judgment prevents a lawyer from representing clients with opposing interests. In re Gerde, 634 N.E.2d 494, 497 (Ind.1994). To establish a violation of Canon 5, the board need not prove the respondent acted with fraudulent or other improper motive. See Committee on Prof'l Ethics & Conduct v. Mershon, 316 N.W.2d 895, 899 (Iowa 1982). Nor does the board need to prove any client suffered economic harm. See Committee on Prof'l Ethics & Conduct v. Postma, 430 N.W.2d 387, 392 (Iowa 1988). Like the commission, we find that from Childers' initial meeting with Wagner, Wagner was representing both Oehl as a seller and Childers as a buyer. Wagner concedes this fact. Although we stop short of finding that Wagner had any role in negotiating the purchase price, we agree with the commission that this fact did not eliminate the conflict. In fact, Wagner recognized this conflict in his title opinion to Childers. As one commentator notes, the differing interests between buyer and seller are obvious, and price is only one of many areas in which those interests differ: The process by which a buyer and seller of property transact their business is fraught with conflicts of interests. Indeed, a lawyer's simultaneous representation of a buyer and a seller in the same transaction is a paradigm of a conflict of interest. Beginning with such basic elements as determining the price and describing the property to be sold, what one party gets the other must concede. Terms of payment, security for unpaid balances, warranties of quality and of title, date of closing and risk of loss in the interim, tax consequences, and a host of other details should be addressed by each party or the party's adviser in a well-thought-out transaction. When the transaction is a large onesuch as the purchase and sale of a residence, commercial property, or a businessthe transaction typically becomes further complicated because the additional interests of banks, brokers, tenants, and title insurance companies may intrude. Charles Wolfram, Modern Legal Ethics § 8.5, at 434 (West 1986) (footnotes omitted) [hereinafter Wolfram]. We also find, as the commission did, that Wagner's own financial stake in the transactionthe ten percent commissionbrought his interests into conflict with Childers' interest, a fact that Wagner concedes. Given the uncertainty of the value of the restaurant and the lack of offers from other interested parties, the purchase of the restaurant was a risky proposition. In these circumstances, Childers had a right to expect competent, disinterested advice that would allow him to make an informed decision on whether to proceed with the purchase at all. Wagner's own interest, on the other hand, was to make sure that the sale went through so he could earn his commission. Wagner's interests conflicted with Childers' interests in two other respects. Childers' interest naturally called for achieving a rock bottom purchase price. In contrast, Wagner's interest called for achieving the highest price possible to maximize his commission. In addition, it was in Wagner's and Oehl's interest that Childers make a sizable down payment. Wagner's up-front commission payment depended upon the size of the down payment. Oehl's interest was what any contract seller would want: the higher the down payment the greater the security. Obviously, Childers' interest was to obtain as small a down payment as possible.