August22,1988

Honorable H. Earl Hall, Jr. Commissioner Opinion No. JM-943
Texas Savings and Loan Department Re: Construction of 2601North Lamar, Suite 201 V.T.C.S. art. 320f Austin, Texas 78705 (RQ-1434)
Dear Mr. Hall:
The 70th Legislature enacted S.B. 1075, codified as article 320f,V.T.C.S., and effective on September 1, 1987. you ask two questions about this new statute:

1. Will aTexas Savings and LoanAssociation (hereinafter Association) be construed tobe charging either directly or indirectly, a fee in violation ofArt. 320f when in connection with any loan the association makes when it:

(i)isan ,interested and/or signatory party to the instruments evidencing the transaction: (ii)performs only the clerical task of 'filling intheblanks' on the appropriate loan documents, such documents having been previously prepared and selected by its attorneys foruse insuch situations: (iii)charges interest on the loan, loan origination fees, application fees and other incidental fees normally associated with extending a loan: and (iv)specifically does not intend to and does not charge a fee forthe preparation of the documents.
2. May the prohibition against charging fees as provided in Art. 320f be fully or partially waived by written and/or oral

p.4743Honorable H. Earl Hall, Jr. -Page 2 :(JM-943)

agreement of the parties, lender and customer? The statute provides as follows: Definition
Sec. 1. In this Act, 'person' has the meaning given that termby Subdivision (2) I Section 311.005, Code Construction Act (Chapter 311, Government Code).

Prohibited Acts
Sec. 2. (a)A person, other than an attorney licensed in this state, may not charge or receive, either directly indirectly, any compensation for all or a:; pa* a5tie-prepar&iun o%aYe-galinstrumeni affecting title to real property, including a deed, deed of trust, note, mortgage, and transfer or release of lien. (b)This section does notprevent aperson from seeking reimbursement for costs incurred by the person to retain a licensed attorney toprepare an instrument. (c)Nothing inthisAct shall be construed to prevent an attorney frompaying secretarial,paralegal, or other ordinary and reasonable expenses necessarily and actually incurred by the attorney forthe preparation of legal instruments nor does itprevent a person from completing lease or rental forms which have been prepared by an attorney licensed in this state and approved by such attorney for the particular kind of transaction involved, or which have been prepared by the property owner orprepared by an attorney and required by the property owner. The provisions of this Act do not apply to a licensed real estate broker or salesman performing the acts of a real estate broker pursuant to the provisions of The Real Estate License Act (Article 6573a, Vernon's Texas Civil Statutes).

p.4744. Honorable H. Earl Hall, Jr. -Page 3 m-943)

(d)Cumulative Remedies. The provisions of this Act are not exclusive and inno way limit or restrict the definition of the practice of law contained in the State Bar Act (Article 320a-1, Vernon's Texas Civil Statutes), nor do theprovisions of this Act limit or restrict any remedy provided in the State BarAct or any other lawdesigned to eliminate the unauthorized practice of lawby laypersons and lay agencies. Recovery
Sec. 3. Aperson who pays a fee prohibitedby this Actmay bring suit for and is entitled to: (1)recovery of the feepaid: (2)damages equal to three times the fee paid; and (3)court costs and reasonable and necessary attorney's fees.

Unauthorized Practice of Law
Sec. 4. Aviolation of this Act constitutes the unauthorized practice of law and may be enjoined by a court of competent jurisdiction.
Transition
Sec. 5. This Act applies only to fees charged or received on or after the effective date of this Act.
your first question is whether a lender violates article 320f if it 1) isaparty to the transaction: 2) only "fills in the blanks" on legal instruments prepared by an attorney: 3) charges interest and fees for the loan: but 4)does not charge a fee for preparing legal instruments affecting title to realproperty. The purpose of article 320f is to prevent the unauthorized practice of lawthat occurswhen a person other than an attorney-prepares legal instruments affecting title to real property. & Carroll v. Bullock, 530 S.W.2d 135, 136 (Tex.Civ. App. - Austin 1975, nowrit): V.T.C.S. art.

p.4745Honorable H. Earl Hall, Jr. -Page 4 UK-943)

320f, 5 2(d) and 8 4;BillAnalysis, Tex. S.B. 1075, 70th Leg. (1987). Whether such aperson isaparty to the real estate transaction towhich the legal instruments relate is irrelevant to applying the statute, which by its terms covers u person, including parties to the transaction. For example, the legislative history quite plainly shows that the statute was meant to apply to lenders. &&8 Bill Analysis, Tex. S.B. 1075, 70th Leg. (1987). Since prohibiting a charge forthe preparation of a legal instrument by aperson other than'an attorney is merely away to curb the unauthorized practice of law, what ismeant in article 320fby the 'preparation of legal instruments" must be decided with reference to the practice of law. Whether the completion by clerks of standard forms prepared by attorneys for routine transactions is "practicing law"will always be a factual and often a close guestion. See 7Tex. Jur.3d Attcrnevs at Law § 10. Although we cannot decide fact questions, we can make some general ~observations. While themere act of recording a borrower's responses to the questions on a standard formprobably does not require legal skill orknowledge andwould therefore not bepracticing law, the act ofdetermining whether the forms should be employed at allprobably does require legal skill orknowledge andwould therefore be practicing law. See Unauthorized Practice Committee v. Cortez 692 S.W.2d 47, 50 (Tex. 1985), cert. denied, 106 S.Ct. 384 i1985). Byprohibiting a charge by a person other than an attorney for "all or anvDart of the preparation of a legal instrument," article 320f envisages a liberal interpretation ofwhat constitutes practicing law. Based on the all-orany-part formulation, we conclude that at leastwhen a fee is charged, the legislature intended there be little room for a person other than a lawyer tohave any role in completing the papers necessary to affect title to real property. Assuming that a fee ischarged, justwhat a person other than an attorney can dobefore violating article 320f will depend on exact factual circumstances. For example, we assume no onewould argue that a secretary who types a document and charges for his effort has prepared "all or any part" of a legal instrument and thus violated article 320f. Similarly, ifa lawyer 1)determines that certain transactions can be conducted by lqf$lling in the blanks" on standard forms; 2)prepares the standard forms: and 3) reviews aparticular transaction to ensure that the standard forms are appropriate, then itmay notviolate article 320f for a lender to have aclerk "fill in theblanks" and for

p.4746Honorable H. Earl Hall, ~Jr.-Page 5 m-943)

the lender to charge forthis clerical service. Indeed, section 2(c) of article 320f contemplates something similar with regard to the lease or rental of real property. As we have already noted, however, we cannot resolve the fact questions raised by.this hypothetical.
Of course, article 320f only applies if a fee is charged. Whether a fee ischarged isanother fact question. Byway of general observation, we note that by prohibiting any compensation, direct or indirect, article 320f envisages a liberal interpretation ofwhat constitutes compensation. Inyour question you posit that no fee ischarged for the preparation of legal instruments, but that interest and other fees are charged. We can only caution that for the preparation of legal instruments ifcompensation for the work of persons other than an attorney is recouped in a charge, no matter what it is labeled, then article 320f applies. In the context of atitle company, the Supreme Court has taken an extremely liberal view ofwhat constitutes acharge forthe preparation oftlegal documents. See Hexter Title h Abstract Co.v. Grievance Committee, 179 S.W.Zd 946, 952 (Tex.1944).
As foryour second question, the answer isthat parties to an agreement that requires preparation of a legal instrument affecting title to real property cannot waive article 320f. The statute does not provide forwaiver. Moreover, waiver is inimical to the statute's purpose --preventing the unauthorized practice of law. Inenacting the statute, the legislature was concerned about protecting the public interest in clear real estate titles. The statute is designed todeter nonlawyers fromdrafting legal instruments and perhaps clouding title by a legal error. @B Hearings on Tex. S.B. 1075 before the Senate Jurisprudence comm., 70th beg. (April 21, 1987) (tape3) (available from Senate Staff Services). When a statute isdesigned toprotect the public interest, itcannot bewaived by private parties. When enacting this statute, the legislature was also concerned about protecting consumers from fees for legal work done by nonlawyers. Id. Presumably sellers or lenders inreal estate transactions often have greater bargaining power than buyers orborrowers. This statute, therefore, prevents the stronger party (the seller or lender) from extracting fees fromtheweaker party (thebuyer or lender). When a statute is designed to protect a party with less bargaining power, it cannot bewaived. If itcould, then the stronger party would merely require waiver of theweaker party, thereby thwarting the purpose of thestatute. se N. Singer, 2A Sutherland Statutory Construction s55.08 (4th ed. 1984); 60Tex. Jur.2d Waiver 5 10.

p.4747,

Honorable H. Earl Hall, Jr. -Page 6 (JM-943)

SUMMARY What constitutes the preparation of legal instruments within the meaning of article 320f isa factquestion. What constitutes the charging of a fee within the meaning of article 320f isa fact question. Parties to a transaction cannot waive article 320f.

JIM MATTOX Attorney General of Texas
MARYKKLLER First Assistant Attorney General LQUMCCRHARY Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General
RICK GILPIN Chairman, Opinion Committee Prepared by F. Scott McCown Assistant Attorney General .-

p.4748