Untitled Texas Attorney General Opinion ( 1988 )

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
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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).
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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.
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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
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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.
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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
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