Other Areas of Law

Rex P. Fennessey, Esquire

Gathering financial documents and information does not constitute the unauthorized practice of law, nor does assisting in the preparation of loan documents and financial disclosure statements which are primarily financial rather than legal in nature. Forwarding information to third parties necessary for the completion of legal documents does not constitute the practice of law when no fee is charged for this service to the customer, and no fee is charged by the third party for the service. Hargis v. JLB Corp. d/b/a Golden Oak Lending, No. 91639 (Mo. banc December 20, 2011) Stith, L.

Bonnie Hargis entered into an agreement with JLB Corporation d/b/a Golden Oak Lending (“JLB”) to refinance her home. JLB matched Hargis with a lender and prepared her loan application and other financial disclosure documents. JLB also gathered the information necessary for title companies and to prepare the promissory note and a mortgage or deed of trust. This information was then sent to third parties, who prepared those documents and returned them to JLB, which then forwarded the completed documents to Hargis. JLB charged a processing and administrative fee for assisting Hargis.

Hargis filed a three-count petition against JLB, alleging (1) JLB engaged in the unauthorized practice of law, (2) by doing so, it engaged in a deceptive and unfair practice in violation of the Missouri Merchandising Practices Act (§§ 407.010, et seq.), and (3) JLB was unjustly enriched when it charged her various fees for services it did not provide. JLB moved for and was granted summary judgment on all counts. Hargis appealed, and the case was eventually transferred to the Missouri Supreme Court.

Held: Affirmed in part, reversed in part and remanded
. The Supreme Court began its discussion by reiterating that, although Missouri statutes have long prohibited the unauthorized practice of law, “the judiciary is the ‘sole arbiter of what constitutes the practice of law,’” and thus, “such statutes merely act in aid of [the Supreme Court’s] regulation” but cannot supplant the Court’s role in defining and controlling the practice of law.

Discussing previous holdings and the relevant portions of § 484.010, the Court held that “law business” is “the drawing or procuring of or assisting in the drawing for valuable consideration of any paper, legal document or instrument affecting or relating to secular rights.” Because Hargis did not allege that JLB actually prepared the documents at issue, the question of whether it engaged in the practice of law turned on whether its actions could be considered “procuring” legal documents. It held that “procurement requires active involvement in the obtaining of some object, person or purpose,” and, “involves acting to bring about or contriving to cause an effect.” Procurement thus “involves more than passively gathering or obtaining information, data or documents from third parties.”

Applying this definition, the Court held JLB did not engage in the practice of law when it gathered copies of previously prepared financial documents relating to Hargis’ prior loans, mortgages, employment and credit history. Further, although it found that promissory notes, mortgages and deeds of trust are legal documents, it held that JLB did not engage in the practice of law with respect to these documents because it merely forwarded to third parties the financial information necessary to prepare them. Because the record did not show that JLB collected a fee for the preparation of these documents or paid a third party to draft or assist in drafting documents (thus creating an agency relationship), the Court found JLB did not engage in the unauthorized practice of law with respect to the preparation of the note, mortgage, or deed of trust. Finally, the Court held that JLB did not engage in the practice of law when it assisted Hargis in preparing her loan application and financial disclosure documents because “unlike a note, deed of trust or mortgage, these applications and disclosure forms are primarily financial – not legal – documents[.]” 

The Court reversed the grant of summary judgment on Count III, however, because JLB failed to establish in its summary judgment motion the facts necessary to negate the elements an unjust enrichment claim; and remanded the case for further proceedings.

Partial dissent:
Judge Teitelman dissented from the affirmance of summary judgment on Counts I and II, which Judge Breckenridge joined. The dissent would have held that the record supported an inference that JLB actively guided Hargis in obtaining particular documents and information; and thus would have held that the record did not conclusively establish that JLB had not “procured” such documents for Hargis. The dissent also took issue with the majority’s conclusion that JLB did not pay third parties for preparing the legal documents at issue; believing it highly unlikely that JLB “simply absorbs the costs” these third parties charged when preparing Hargis’ documents.