A legislative ethics panel ruled today that Del. Gerard F. Devlin (D-Prince George's), a close ally of the Maryland teachers union, has a potential conflict of interest because his law firm agreed to perform legal work for members of the union.

Devlin's Bowie law firm recently signed a contract with the National Education Association to handle legal work for unionized teachers at the reduced rate of $42 an hour. Devlin's firm was one of several in the state chosen for the work.

Devlin, who frequently sponsors bills backed by local and state teachers unions, appeared today before the General Assembly's Joint Committee on Ethics and claimed he has no conflict of interest because he has not yet benefited from the contract.

In addition, he said, his law partners merely split office expenses, not legal fees. The firm has agreed to assign teacher cases on a rotation basis, he added, so that he would only benefit from the few cases referred to him each year.

Committee members decided, however, that the firm's relationship with organized teachers presented at least the appearance of a conflict. "Your firm's face to the public doesn't say 'sharing expenses only,' " noted Sen. John A. Cade (R-Anne Arundel).

Under rules of the legislature, lawmakers who have a conflict of interest must disqualify themselves from voting. Or, if they believe their conflict is not so serious as to impair their judgment, they can disclose the conflict in a sworn statement with the committee and still retain their voting privileges.

Devlin, who led last year's fight against the pension reform bill bitterly opposed by the teachers' union and is sponsoring legislation this session that would require nonunion members to pay partial union dues for benefits they receive, said he would disclose his legal arrangement with the union and continue to push legislation favorable to teachers.

The ethics committee an advisory panel that can issue opinions only if they are formally requested, did not respond to news reports that Sen. Lawrence Levitan (D-Montgomery), a prime sponsor of legislation pursued by mortgage banks, earns thousands of dollars in legal fees annually by reviewing loan transactions for a mortgage bank.

Senate President James Clark Jr. said on the night that the news disclosures appeared 10 days ago that he would ask the ethics panel to determine if Levitan had a conflict of interest. But Clark never asked the committee for an opinion, committee members disclosed today.Clark could not be reached for comment.

Levitan is one of the chief sponsors of legislation to lift the existing 10 percent interest rate on home mortgage loans. The bill is designed to increase the availability of home mortgage financing in Maryland.

At the same time, Levitan is counsel for the mortgage banking firm of Suburban Coastal Corp. and receives $75 for every loan given out by the firm in Maryland, Virginia and Washington. Levitan said he handles "at least several hundred" home mortgage loans annually for the firm.

If the legislature passes Levitan's bill and removes the ceiling on mortgage interest rates, companies such as Suburban Coastal would be expected to increase the number of mortgage loans they make and send their counsel more cases to review.