Dressel v. Ameribank

• Decision Date: 31 October 2001
• Docket Number: Docket No. 222447.
• Citation: 247 Mich. App. 133,635 N.W.2d 328
• Parties: Paul DRESSEL and Theresa Dressel, Plaintiffs-Appellants, v. AMERIBANK, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

635 N.W.2d 328

247 Mich. App. 133

Paul DRESSEL and Theresa Dressel, Plaintiffs-Appellants, v. AMERIBANK, Defendant-Appellee.

Docket No. 222447.

Court of Appeals of Michigan.

Submitted April 11, 2001, at Grand Rapids.

Decided August 3, 2001, at 9:05 a.m.

Released for Publication October 31, 2001.

Drew Cooper & Anding (by John E. Anding and Christopher G. Hastings), Grand Rapids, for the plaintiffs.

Cunningham Dalman, P.C. (by Ronald J. Vander Veen), Holland, for the defendant.

Warner Norcross & Judd LLP (by James H. Breay and Carin L. Ojala), Grand Rapids, for amicus curiae Michigan Bankers Association.

Before WHITBECK, P.J., and SMOLENSKI and COOPER, JJ.

COOPER, J.

Plaintiffs appeal as of right from the trial court's June 12, 1999, opinion that granted defendant's motion for summary disposition pursuant to MCR 2.116(C)(10). We reverse and remand.

On November 7, 1997, plaintiffs obtained from defendant a real estate loan that was secured by a mortgage on their home. In connection with the loan, defendant prepared an adjustable rate note and a mortgage for plaintiffs. The settlement statement designated a $400 fee for "document preparation." According to the documentation defendant provided plaintiffs, the document preparation fee was described as "a separate fee that some lenders or title companies charge to cover their costs of preparation of final legal papers, such as a mortgage, deed of trust, note or deed." United States Dep't of Housing & Urban Development. Buying Your Own Home, part III, § a (HUD-398-H[4], 1997) (http://www.hud.gov/fha/res/sc3secta.html).

In December 1998, plaintiffs filed suit, arguing that the charge for completing mortgage documents constituted the unauthorized practice of law by defendant, was illegal under the laws regulating banks in this state, violated the Michigan Consumer Protection Act (MCPA), M.C.L. § 445.901 et seq., and ignored the common law of the state of Michigan. This case was certified as a class action on March 22, 1999, to provide potential relief for any borrowers who had also been charged the "document preparation" fee. Plaintiffs filed a motion for partial summary disposition on March 26, 1999. On April 5, 1999, defendant moved for summary disposition pursuant to MCR 2.116(C)(8) and (10). The trial court granted defendant's motion for summary disposition on the basis of MCR 2.116(C)(10). Plaintiffs now appeal the trial court's decision.

This Court reviews de novo a grant or denial of summary disposition. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). Summary disposition of a claim may be granted when, "[e]xcept as to the amount of damages, there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law." MCR 2.116(C)(10); see also Smith v. Globe Life Ins. Co., 460 Mich. 446, 454-455, 597 N.W.2d 28 (1999).

Plaintiffs contend the "document preparation" fee is, under these circumstances, the unauthorized practice of law. We agree.

Michigan law prohibits the unauthorized practice of law by individuals. MCL 600.916. Moreover, M.C.L. § 450.681 specifically enjoins corporations from practicing law without a license. That statute, in pertinent part, provides:

It shall be unlawful for any corporation or voluntary association to practice or appear as an attorney-at-law for any person other than itself in any court in this state or before any judicial body, or to make it a business to practice as an attorney-at-law, for any person other than itself[.] ... This section shall not apply to any corporation or voluntary association lawfully engaged in a business authorized by the provisions of any existing statute, nor to a corporation or voluntary association lawfully engaged in the examination and insuring of titles of real property, nor shall it prohibit a corporation or voluntary association from employing an attorney or attorneys in and about its own immediate affairs or in any litigation to which it is or may be a party [.] ... But no corporation shall be permitted to render any services which cannot lawfully be rendered by a person not admitted to practice law in this state nor to solicit directly or indirectly professional employment for a lawyer.

However, these statutes fail to define precisely what constitutes the "practice of law." Rather, such determinations have been left to the discretion of the courts. State Bar of Michigan v. Cramer, 399 Mich. 116, 132, 249 N.W.2d 1 (1976). The courts must weigh all the factors, keeping in mind the purpose of the prohibition, which is to protect the public from untrained legal counsel and incorrect legal advice. Id. at 133-134, 249 N.W.2d 1.

Several Michigan cases have endeavored to provide relevant criteria to determine what activities amount to the practice of law. For example, the Court, in Grand Rapids Bar Ass'n v. Denkema, 290 Mich. 56, 287 N.W. 377 (1939), concluded that charging a fee for the preparation of legal instruments for others constitutes the practice of law. In that case, the defendant, who was not an attorney, was engaged in the business of insurance and real estate loans and had, among other things, drawn mortgages and wills for others. Id. at 59-60, 287 N.W. 377. The trial court enjoined defendant's activities, and he appealed the portion of the injunction that prevented him from taking notes concerning wills and then transmitting that information to an attorney. Id. at 64-65, 287 N.W. 377.

Our Supreme Court examined numerous cases from other jurisdictions and noted:

The preparation of conveyances of real estate and personal property by the defendant for others, for a consideration, comes within the usual and ordinary definition of "practice of law." The preparation of legal papers in connection with his business as a loan broker has been held to be the practice of law. [Id. at 66, 287 N.W. 377, citing Ferris v. Snively, 172 Wash. 167, 19 P.2d 942 (1933); State ex rel Wright v. Barlow, 131 Neb. 294, 268 N.W. 95 (1936).]

The Court also agreed with the proposition that the preparation of legal documents, when done as a business, constitutes the practice of law. Denkema, supra at 66-67, 287 N.W. 377, citing People v. Alfani, 227 N.Y. 334, 125 N.E. 671 (1919); Paul v. Stanley, 168 Wash. 371, 12 P.2d 401 (1932).

The Court in Denkema further discussed whether the preparation of documents, without providing counsel or advice with regard to the effects of those documents, is considered the practice of law.

"We do not desire to be understood as saying that the mere act of drawing a promissory note, chattel mortgage, real estate mortgage, deed or other similar instruments would constitute the practice of law, where the person so drawing them acts merely as an amanuensis and does not advise or counsel as to the legal effect and validity of such instruments." [Denkema, supra at 67, 287 N.W. 377, quoting Barlow, supra at 296, 268 N.W. 95.]

Ultimately, the Court concluded that "[t]he activities of the defendant in connection with the probate of estates in which he was not personally interested come within the prohibition of the Michigan statute." Denkema, supra at 69, 287 N.W. 377. Thus, Denkema provides that the preparation of legal documents constitutes the practice of law when it is done as a business, by an uninterested party, and when advice or counsel is given concerning the effect of those documents.

About fifteen years later, in Ingham Co. Bar Ass'n v. Walter Neller Co., 342 Mich. 214, 69 N.W.2d 713 (1955), the Supreme Court revisited the question of what constitutes the practice of law. In that case, the defendants, who were not attorneys but were licensed real estate brokers, had filled in printed forms of various legal significance that were incidental to the real estate transactions in which they were engaged. Id. at 217, 69 N.W.2d 713. However, the defendants did not charge any extra fees for these services. Id.

The Walter Neller Court compared the facts in Denkema with the facts of the case before it, stating that

[t]he difference between the Denkema Case and the one at bar is that in the former the defendant appeared to be in the business of executing these instruments rather than doing so without extra compensation and as incidental to another lawful business—the situation at bar. [Id. at 222, 69 N.W.2d 713 (emphasis added).]

The Court held that "[t]here cannot be any objection to a licensed broker doing such work [filling in standardized forms of agreements of purchase and sale, land contracts, deeds, and mortgages] without compensation when it is incidental to his business." Id. at 229, 69 N.W.2d 713 (emphasis added).

The Walter Neller decision was upheld in State Bar of Michigan v. Kupris, 366 Mich. 688, 116 N.W.2d 341 (1962). In Kupris, the defendant realtor charged a separate fee for the preparation of legal documents in a transaction in which he was not involved. Id. at 690, 116 N.W.2d 341. The trial court enjoined the defendant from performing legal services and giving legal advice but allowed him to continue filling out standard printed forms that were incidental to his business, provided that no extra charge was made. Id. at 691-692, 116 N.W.2d 341. On appeal, the Court reaffirmed the Walter Neller decision and upheld the trial court's injunction. Thus, Kupris implied that the trial court's injunction was consistent with the holding of Walter Neller. Id. at 696, 116 N.W.2d 341.

Despite the numerous cases pertaining to real estate brokers, Michigan case law has yet to declare specifically that charging a separate fee for the preparation of legal documents by a banking institution constitutes the unauthorized practice of law. However, such a conclusion is supported by a significant body of case law in other jurisdictions. After examining the case law of other states that have decided this issue, we find that the majority have concluded that filling in legal documents...