High court rules in favor of title company fees

Steve Korris May 2, 2005, 9:32am

Supreme Court Justice Rita B. Garman (4th District)

For 39 years the Illinois Supreme Court has allowed title companies to prepare legal documents without law licenses, reasoning that they act “pro se” - for themselves.

Now, the Court has ruled that the pro se exception applies even when a title company charges a fee for preparing documents.

On April 21, in King v. First Capital Financial Services, the Court dismissed 36 suits that claimed damages from title companies for unauthorized practice of law.

All the suits came from Cook County except one from Rock Island County. Circuit judges had dismissed them and appellate judges had affirmed.

Justice Rita Garman wrote that plaintiffs did not claim that they received legal services or that defendants held themselves out as providing legal services.

“Their sole claim is that the charging of these document preparation fees transformed otherwise legal conduct into illegal conduct,” she wrote. “In doing so, they do not claim that they have suffered any harm…”

Plaintiffs did not claim that defendants improperly prepared mortgages or notes, Garman wrote, nor did they claim that defendants did not disclose the fees.

“They do not argue that they believed defendants were acting as their attorneys or were advising them on legal matters in any way,” she wrote.

The intertwining of title work and legal practice recently created a sensation in Madison County. Alton attorney Emert Wyss initiated a lawsuit that boomeranged when Circuit Judge Phillip Kardis added Wyss as a defendant.

Wyss owned Centerre Title, which operated in the building where he practiced law. He invited former Centerre Title client Carmelita McLaughlin to his law office and told her she paid an improper $60 fax fee when she borrowed from Alliance Mortgage.

McLaughlin retained Wyss and three other firms to file a class action lawsuit. Alliance Mortgage asked Kardis to add Centerre Title as a third party defendant, arguing that if anything was wrong with the loan, Centerre Title should have told McLaughlin.

Kardis added Centerre Title and Wyss personally as third party defendants. Alliance Mortgage filed a third party complaint against them. Wyss moved April 8 to dismiss the complaint. Kardis has not set a hearing.

Under the Illinois Constitution, the state Supreme Court defines and regulates the practice of law.

“All parties agree, and we concur, that defendants’ preparation of the notes and mortgages constitutes the practice of law,” Garman wrote.

Defendants argued that it was an authorized practice of law because it fell within an exception the Court approved in Chicago Bar Association v. Quinlan & Tyson, in 1966.

In that case, the Court held that mortgage brokers could insert facts on standard forms. The court approved a pro se exception “where the party preparing the legal documents does so for his or her own benefit in a transaction to which the preparer is a party.”

Plaintiffs in this year’s case argued that the Quinlan decision prohibited fees, but Garman wrote that Quinlan did not present a question of compensation. They cited an Indiana case, but according to Garman the activities in it were not considered law practice.

Plaintiffs also:

  • Tried to cite a Wisconsin Supreme Court case, but according to Garman they quoted a board rule rather than the decision.

  • Cited cases from North Dakota and Montana, but Garman wrote that they did not discuss why receipt of compensation was prohibited.

  • Cited a 1948 Illinois case, Chicago Bar Association v. Tinkoff, but Garman wrote that it did not apply because it involved a disbarred lawyer and a subterfuge.

  • Cited the Attorney Act, which states that anyone charging for legal services without a license is guilty of contempt of court. Garman noted that no one has amended the act since the Quinlan decision. He wrote that reliance on the act was misplaced.

    “We hold that the charging of a fee, without more, for the preparation of the loan documents by the lenders’ employees did not transform their conduct into the unauthorized practice of law,” Garman summarized.

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