Mortgages; Unauthorized Practice of Law

King v First Capital Financial Services Corp, 215 Ill 2d 1, 828 NE2d 1155, 293 Ill Dec 657 (Ill 2005).

Facts: Sheila and Willard King obtained a mortgage from lender First Capital Financial Services (First Capital) when buying their new home. First Capital prepared the mortgage documents using its own employees, who were not lawyers, and charged the Kings $225 for document preparation. The Kings brought suit against First Capital, claiming the lender violated the Truth-in-Lending Act when First Capital did not disclose the finance charges on the mortgage. The Kings also brought three class action claims against First Capital, alleging the following: (1) First Capital engaged in the unauthorized practice of law when it prepared the mortgage documents and charged the Kings a fee for this service; (2) First Capital violated the Consumer Fraud and Deceptive Business Practices Act when it engaged in the unauthorized practice of law and did not give notice to the Kings; (3) First Capital engaged in the unauthorized practice of law and must repay the $225 document preparation fee.

First Capital made a motion to dismiss all three class action claims, and the circuit court dismissed only the first class action claim. First Capital appealed, claiming all three class action claims should have been dismissed. The Third District Appellate Court held all three class action claims should have been dismissed and remanded the case. The Illinois Supreme Court allowed the Kings' petition for leave to appeal.

The Court consolidated the Kings' case with the Jenkins' case, Jenkins v Concorde Acceptance Corp., 345 Ill App 3d 669, 802 NE2d 1270, 280 Ill Dec 749 (1st D 2003), which comprised 37 class action suits consolidated on appeal. All but two of the cases involve facts similar to the Kings' case-mortgagors brought suit against their lenders for unlawful practice of law because the mortgage documents were prepared by non-lawyer employees. The two cases that differ from King involve suits against independent document preparation services, rather than lenders, for the preparation of loan documents by non-lawyers. A national bank and several federal savings associations, all defendants in this case, filed a Section 2-619 motion to dismiss, which the circuit court in Cook County granted. The appellate court affirmed the circuit court's motion to dismiss on appeal. The Illinois Supreme Court granted borrowers' petition for leave of appeal.

The Court allowed the Illinois State Bar Association, Halt, Inc., Illinois Bankers Association, American Bankers Association, and the Department of the Treasury's Office of the Comptroller of the Currency and Office of Thrift Supervision to file briefs for this case.

Holding: Affirmed. A pro se exception to the prohibition on the unauthorized practice of law allows a non-lawyer party to prepare his or her own legal documents in his or her own transaction. The preparation of those documents does not become an illegal action when the non-lawyer party drafting the documents charges a fee, as occurred in both King and Jenkins. In the cases at hand, the lenders charged the borrowers for the preparation of documents that benefited the lenders, because the documents evidenced the borrowers' indebtedness to the lenders. Therefore, First Capital and the Jenkins' lenders' actions fell under the pro se exception.

However, in the two cases where the borrowers sued an independent document preparation service, the independent document preparation service could not claim to have a pro se exception because they were not preparing their own legal documents for their own transaction. None of the borrowers could recover monetary damages because of the voluntary payment doctrine—a person cannot recover a payment made willingly and with knowledge unless the person can show that the claim for money was illegal and that the payment was not voluntary. In the cases at hand, there was no indication that any of the borrowers were compelled to pay the lenders the document preparation fees.

EDITOR'S NOTE: ATG assisted in the preparation of the Illinois State Bar Association's brief of amicus curiae. ATG President, Peter Birnbaum, and three of its Directors (Jim Elson, John O'Brien, and Naomi Schuster) are members of the ISBA Task Force on the Unauthorized Practice of Law and provided input into the ISBA brief. This ATG team believes that King represents a strong reaffirmation of the landmark Quinlan and Tyson decision of 1966.

© ATG atgc0603vol30
 

Print this page