Court Opinion

ID: 4130526
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:05:22.535041+00
Date Added: 2024-06-11T14:31:38.998856
License: Public Domain

August 22, 1988

Honorable H. Earl Hall, Jr.              Opinion No.   JM-943
Commissioner
Texas Savings and Loan Department        Re: Construction of
2601 North 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 a Texas Savings and Loan Associa-
        tion (hereinafter Association) be construed
        to be charging either directly or indirectly,
        a fee in violation    of Art. 320f when    in
        connection with any loan the association
        makes when it:

              (i) is an ,interested and/or signatory
           party to the instruments   evidencing the
           transaction:

              (ii) performs only the clerical task of
           'filling in the blanks' on the appropriate
           loan documents, such documents having been
           previously prepared and selected by its
           attorneys for use in such 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 for the prepar-
           ation 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. 4743
Honorable 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 term by 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*   a5 tie-prepar&iun  o% a Ye-gal instrumeni
        affecting title to real property, including a
        deed, deed of trust, note, mortgage,         and
        transfer or release of lien.

           (b) This section does not prevent a person
        from seeking reimbursement for costs incurred
        by the person to retain a licensed attorney
        to prepare an instrument.

            (c) Nothing in this Act shall be construed
        to prevent an attorney from paying    secretar-
        ial, paralegal, or other ordinary and reason-
        able expenses     necessarily    and   actually
        incurred by the attorney for the preparation
        of legal instruments nor does it prevent       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 or prepared 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 in no 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 the provisions of this Act
           limit or restrict any remedy provided in the
           State Bar Act or any other law designed    to
           eliminate the unauthorized practice of law by
           lay persons and lay agencies.

                               Recovery

               Sec. 3. A person who pays a fee prohib-
            ited by this Act may bring suit for and is
            entitled to:

               (1) recovery of the fee paid:

                (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. A violation  of this Act consti-
            tutes 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) is a party 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 real property.

         The purpose   of article    320f is to prevent      the
    unauthorized practice of law that occurs when 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, no writ): V.T.C.S.   art.

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

320f, 5 2(d) and 8 4; Bill Analysis,   Tex. S.B. 1075, 70th
Leg. (1987). Whether such a person   is a party to the real
estate transaction to which 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 for the preparation of a
legal instrument by a person other than'an attorney        is
merely a way to curb the unauthorized practice of law, what
is meant   in article 320f by 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 "practic-
 ing law" will always be a factual and often a close gues-
tion. See 7 Tex. Jur.3d Attcrnevs at Law § 10. Although we
cannot decide   fact questions, we can make some general
~observations. While the mere act of recording a borrower's
responses to the questions on a standard form probably   does
not require legal skill or knowledge and would therefore not
be practicing law, the act of determining whether the forms
 should be employed at all probably does require legal skill
or knowledge   and would 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).

     By prohibiting  a charge by a person other than an
attorney for "all or anv Dart of the preparation of a legal
instrument," article 320f envisages a liberal interpretation
of what constitutes  practicing law. Based on the all-or-
any-part formulation, we conclude that at least when a fee
is charged, the legislature intended there be little room
for a person other than a lawyer to have any role in
completing the papers necessary   to affect title to real
property.

     Assuming that a fee is charged,     just what a person
other than an attorney can do before violating article    320f
will depend on exact factual circumstances.   For example, we
assume no one would argue that a secretary who types a docu-
ment and charges  for his  effort has prepared    "all or any
part" of a legal instrument and thus violated article    320f.
Similarly, if a lawyer 1) determines that certain transac-
tions can be conducted by lqf$lling in the blanks"          on
standard forms; 2) prepares the standard      forms: and 3)
reviews a particular transaction to ensure that the standard
forms are appropriate, then it may not violate article    320f
for a lender to have a clerk "fill in the blanks" and for

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

the lender to charge for this 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 is charged is another fact question.
By way of general observation,  we note that by prohibiting
any compensation, direct or indirect, article 320f envisages
a liberal interpretation  of what constitutes   compensation.
In your question you posit that no fee is charged 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   if compensation    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 a title company, the Supreme
Court has taken an extremely liberal view of what consti-
tutes a charge for the preparation oft legal documents.    See
Hexter Title h Abstract    Co. v. Grievance   Committee,   179
S.W.Zd 946, 952 (Tex. 1944).

     As for your second question, the answer is that parties
to an agreement that requires preparation of a legal instru-
ment affecting title to real property cannot waive article
320f. The statute does not provide for waiver.      Moreover,
waiver is inimical to the statute's purpose -- preventing
the unauthorized practice of law. In enacting the statute,
the legislature was concerned about protecting the public
interest in clear real     estate titles.    The statute      is
designed to deter nonlawyers from drafting 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)   (tape 3) (available from Senate
Staff Services).  When a statute is designed to protect      the
public interest,  it cannot be waived 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
in real estate transactions often have greater bargaining
power than buyers or borrowers.     This statute, therefore,
prevents the stronger party    (the seller or lender)      from
extracting fees from the weaker party (the buyer or lender).
When a statute is designed to protect a party with less
bargaining power, it cannot be waived.     If it could, then
the stronger party would merely require waiver of the weaker
party, thereby thwarting   the purpose of the statute.      se
N. Singer, 2A Sutherland Statutory Construction s 55.08 (4th
ed. 1984); 60 Tex. 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 is a fact question. What con-
       stitutes the charging of a fee within     the
       meaning of article 320f is a fact question.
       Parties to a transaction cannot waive article
       320f.

                                      JIM     MATTOX
                                      Attorney General of Texas

MARYKKLLER
First Assistant Attorney General

LQU MCCRHARY
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