Washington State Bar Ass'n v. Great Western Union Federal Sav. and Loan Ass'n

• Decision Date: 16 November 1978
• Docket Number: No. 45350,45350
• Citation: 91 Wn.2d 48,586 P.2d 870
• Parties: WASHINGTON STATE BAR ASSOCIATION, Respondent/Cross-Appellant, v. GREAT WESTERN UNION FEDERAL SAVINGS AND LOAN ASSOCIATION and Kathleen Kelley, Appellants.
• Court: Washington Supreme Court

Page 48

91 Wn.2d 48

586 P.2d 870

WASHINGTON STATE BAR ASSOCIATION, Respondent/Cross-Appellant, v. GREAT WESTERN UNION FEDERAL SAVINGS AND LOAN ASSOCIATION and Kathleen Kelley, Appellants.

No. 45350.

Supreme Court of Washington, En Banc.

Nov. 16, 1978.

Johnson, George, Hull & Porter, P. S., Larry Setchell, Seattle, for appellants.

Kain & Snow, George A. Kain, Spokane, for respondent, cross-appellant.

STAFFORD, Justice.

Appellants Great Western Union Federal Savings and Loan Association and Kathleen Kelley (hereinafter referred to collectively as Great Western) appeal a judgment which declares certain of their activities to be the unauthorized practice of law. Respondent Washington State Bar Association (Bar Association) cross-appeals the trial court's refusal to grant injunctive relief. We affirm in part and reverse in part.

Great Western, a federally chartered savings and loan association, lends money to purchasers of real property in exchange for obtaining a security interest in the property purchased. Purchasers may obtain either a new loan or assume an existing loan owed to Great Western by the seller of the property.

Great Western also provides a "closing" service to the purchaser and seller. As a part of this service, Great Western selects and completes legal documents which it deems necessary and appropriate to close both the loan between it and the purchaser and the sale between the purchaser and seller. In this respect, Great Western selects and completes such forms as promissory notes, deeds of trust, statutory warranty deeds, 1 percent real estate excise tax affidavits, agreements modifying deeds of trust and promissory notes, seller's letter of closing instructions, ¹ and advance disclosure statements required by the Real Estate Settlement Procedures Act (RESPA) 12 U.S.C. § 2601 Et seq. Great Western then presents the documents needing signatures to the parties, states the title of each document, requests and obtains signatures on documents. Additionally, Great Western furnishes its borrower (the purchaser) with a loan commitment letter indicating that the sale and loan will be closed in its offices ² and provides a booklet prescribed by the United States Department of Housing and Urban Development.

As part of its "closing service", Great Western charges the parties a settlement or closing fee. The fee is designed to recover Great Western's actual cost in performing the "closing services" and is determined by a schedule without regard to services actually performed. This fee is not itemized according to the "closing service" provided and includes charges for Great Western's services in (1) obtaining hazard and casualty insurance on the property; (2) establishing a computer record for the loan obligation; (3) preparation of additional disclosure statements required by RESPA and the Truth-In-Lending Act (15 U.S.C. § 1601 Et seq.); (4) obtaining signatures on the documents; (5) recording documents; and (6) disbursing loan proceeds.

In addition to the closing fee, Great Western also charges a loan service fee for new loans or an assumption fee for loan assumption agreements. For these fees Great Western Performs the following services: (1) receives and prepares the loan or assumption application; (2) verifies the borrower's financial and credit history; (3) prepares and delivers to the borrower various disclosure forms required by RESPA (4) obtains and evaluates an appraisal of the property; (5) reviews the entire loan application package; and (6) prepares and issues to the borrower a loan commitment letter.

Between July 1, 1975 and December 31, 1975, Great Western conditioned its approval of new loans as well as assumption applications upon its closing, in Great Western's offices, All transactions involving Great Western and the purchaser and seller. This policy, although in force for only 6 months, was applied even in those cases where Great Western knew that the purchaser and seller had previously appointed attorneys, title companies, or escrow companies as their closing agent for the sale transaction.

In one transaction Great Western's closing agent Kelley prepared For a seller and buyer a promissory note and second deed of trust Solely between the seller and buyer, which was subordinate to Great Western's existing deed of trust securing the loan being assumed by the purchaser.

At all times relevant to the action herein, neither appellant was enrolled as an active member of respondent Bar Association.

In December 1975, respondent Bar Association filed this action for a declaratory judgment that many of Great Western's activities constituted the unauthorized practice of law and to restrain Great Western from further acts constituting the unauthorized practice of law. Following trial, the court entered a judgment which declared the following acts of Great Western and its employee Kelley to be the unauthorized practice of law. ³

2. The activities . . . between July 1, 1975 and December 31, 1975 in conditioning approval of its loan applications and assumption applications on the substitution of its agents for attorneys or others previously appointed by the parties to real estate transactions for the purpose of drafting the following legal documents utilized in said transactions: deeds substantially in the form prescribed by RCW 64.04.030, RCW 64.04.040, and RCW 64.04.050, to which the Defendant is not a party and whether or not a fee is charged of the parties thereto, and mortgages, deeds of trust, promissory notes or agreements modifying such documents to which the Defendant Great Western is a party and charges a fee of the other party for such preparation, or to which the Defendant Great Western is not a party, constitutes the unauthorized practice of law.

3. The selection and completion of deed forms, or the drafting of deeds substantially in the form prescribed by RCW 64.04.030, RCW 64.04.040, and RCW 64.04.050, conveying an interest in real property when done with or without the charging of a fee by one not licensed to practice law and not a party to said conveyance.

4. The charging of a fee to the other party for the selection and completion of or the drafting of Mortgages, Deeds of Trust, Promissory Notes and agreements modifying said documents by one not licensed to practice law where the preparer of such legal documents is a party to the documents by reason of lending its funds to the other party to such documents.

Although it entered a finding of fact that the foregoing activities would continue unless restrained, the trial court denied the Bar Association's request for injunctive relief.

Great Western appealed assigning error to the foregoing paragraphs of the judgment and to the conclusions of law entered in support of the judgment. The Bar Association cross-appealed the trial court's refusal to grant injunctive relief.

No error has been assigned to the findings of fact so they become the established facts of this case. Lakeside Pump & Equip., Inc. v. Austin Constr. Co., 89 Wash.2d 839, 842, 576 P.2d 392 (1978); Jordin v. Vauthiers, 89 Wash.2d 725, 728, 575 P.2d 709 (1978). Consequently our review is limited to determining whether those facts support the trial court's conclusions of law and judgment. Lakeside Pump & Equip., Inc. v. Austin Constr. Co., supra 89 Wash.2d at 842, 576 P.2d 392; Jordin v. Vauthiers, supra, 89 Wash.2d at 728, 575 P.2d 709.

Central to this appeal is Great Western's argument that the trial court erroneously concluded that:

The selection and completion of form legal documents, or the drafting of legal documents, including Deeds, Mortgages, Deeds of Trust, Promissory Notes and agreements modifying such legal documents, whereby the parties thereto are subject to binding legal rights and obligations, constitutes the practice of law.

(Conclusion of Law 4.) Since the unchallenged findings of fact establish that Great Western engaged in these activities we need only consider Great Western's legal argument that such activities must be performed For another to be the "practice of law."

The basic fallacy in Great Western's argument is its failure to differentiate between activities which constitute the practice of law from the person engaging in those activities. It is the nature and character of the service performed which governs whether given activities constitute the practice of law. Washington State Bar Ass'n v. Washington Ass'n of Realtors, 41 Wash.2d 697, 699, 251 P.2d 619 (1952). If the nature and character of the activities result in a determination that the activities are the practice of law, the subsequent inquiry becomes whether the one undertaking such practice is authorized to do so. Hence, in considering the trial court's conclusion of law, we are only concerned with whether the nature and character of the activities involved warrant the conclusion that Anyone undertaking them is engaged in the practice of law.

The "practice of law" does not lend itself easily to precise definition. However, it is generally acknowledged to include not only the doing or performing of services in the courts of justice, throughout the various stages thereof, but in a larger sense includes legal advice and counsel and the preparation of legal instruments by which legal rights and obligations are established. In re Droker & Mulholland, 59 Wash.2d 707, 719, 370 P.2d 242 (1962); State ex rel. Laughlin v. Washington State Bar Ass'n, 26 Wash.2d 914, 927-28, 176 P.2d 301 (1947); Yount v. Zarbell, 17 Wash.2d 278, 135 P.2d 309 (1943); Hecomovich v. Nielsen, 10 Wash.App. 563, 571, 518 P.2d 1081 (1974). See Burien Motors, Inc. v. Balch, 9 Wash.App. 573, 513 P.2d 582 (1973); Andersen v. Northwest Bonded Escrows, Inc., 4 Wash.App. 754, 484 P.2d 488 (1971). Further, selection and completion of preprinted form legal documents has been found to be the "practice of law." In re Droker & Mulholland, supra; Washington State Bar Ass'n v. Washington Ass'n of Realtors,...