Opinion
No. ED 87582
November 28, 2006
Appeal from the Circuit Court of the County of St. Louis Honorable Mark D. Seigel.
Charles Alan Seigel, Harold L. Satz, Doreen D. Dodson St. Louis, MO, James T. Barry, Jr., Gregory F. Herkert, St. Louis, Mo, for Appellant.
Joe D. Jacobson, David T. Butsch, Jonathan F. Andres, Allen P. Press, Clayton, MO, for Respondent.
Midwest BankCentre ("Midwest") appeals the judgment in favor of Patricia Eisel and Clark Eisel as representatives of a class (collectively referred to as the "Eisels") and the trial court's granting of treble damages based on a finding that Midwest engaged in the unauthorized business of law in violation of Section 484.010 RSMo 2000. We would affirm the trial court's judgment; however, in light of the general interest and importance of the issues involved, we transfer the case to the Missouri Supreme Court, pursuant to Rule 83.02.
All further statutory references are to RSMo 2000.
I. BACKGROUND
Midwest is a Missouri state-chartered bank with offices located in St. Louis County. In processing mortgage loans, Midwest employees complete pre-printed forms. These forms place each loan in the proper format to be sold on the secondary mortgage market, a benefit to Midwest. Nevertheless, Midwest charges its borrowers a fee for preparing such forms referred to as a "document preparation fee" or a "processing fee."
Although these forms are supplied by vendors who obtain them from federal organizations, such forms are not reviewed or approved by Missouri attorneys. These forms include: a deed of trust, a promissory note, a Good Faith Estimate, HUD-1 settlement statement and truth-in-lending disclosure, as well as various other documents, depending on the loan involved.
On November 24, 2001 and November 29, 2001, Midwest made two mortgage loans to the Eisels. Midwest informed the Eisels of the document preparation fee and the Eisels paid the fee on both loans.
Patricia Eisel and other plaintiffs initiated this suit as a class action against a number of lending institutions in the St. Louis area alleging that such institutions were engaging in the unauthorized business of law through their loan processing procedures. The trial court granted class certification and certified six plaintiff subclasses, one of which included all persons who paid a fee to Midwest in connection with real estate financing during a named period of time. Patricia and Clark Eisel were appointed class representatives. Thereafter, the trial court severed the action involving multiple institutions into separate causes against each financial institution. This severance resulted in the current suit.
After a bench trial on stipulated facts, the trial court entered judgment in favor of the Eisels on their claim that Midwest engaged in the unauthorized business of law in violation of Section 484.010 and awarded treble damages pursuant to Section 484.020.
Midwest filed a motion for new trial and for the first time challenged the constitutionality of the treble damages clause of Section 484.020. The trial court denied Midwest's motion based on the merits. Midwest appeals.
On appeal, this Court questioned whether or not the judgment at the trial level was final and within this Court's jurisdiction because the suit originated as a class action and was subsequently severed into a number of separate suits. This Court directed both parties to file memoranda addressing the jurisdiction of this Court. Later, ABN AMRO Mortgage Group, Inc. and North American Mortgage Company filed a combined motion to intervene in this appeal and dismiss for want of jurisdiction. Countrywide Home Loans, Inc. filed similar motions. This Court granted Lenders' motions to intervene for the limited purpose of challenging jurisdiction. The trial court then issued a Rule 74.01 order stating that its judgment was final and that in the event it was not, there was no just reason for delay in an appeal of the judgment.
We refer to these three companies collectively as "Lenders."
After review, Lenders' motions to dismiss this appeal for lack of jurisdiction are denied. We find all issues and claims as to the parties involved, Midwest and Patricia and Clark Eisel, as representatives of the class, were disposed of at the trial level. Consequently, jurisdiction is proper.
II. DISCUSSION
Midwest challenges the judgment of the trial court below. Review of a court-tried case is governed by Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). However, when a case is submitted on stipulated facts, as here, this Court must determine "whether the trial court drew the proper legal conclusions from the facts stipulated." Junior College Dist. of St. Louis v. City of St. Louis, 149 S.W.3d 442, 446 (Mo. banc 2004). In making this determination, we "accept the evidence and inferences favorable to the prevailing party and disregard all contrary evidence." General Motors Acceptance Corp. v. The Windsor Group, Inc., 103 S.W.3d 794, 796 (Mo.App.E.D. 2003). We review questions of law de novo. Smith v. Shaw, 159 S.W.3d 830, 832 (Mo. banc 2005).
In its first point, Midwest contends the trial court erred in overruling Midwest's motion for new trial because Section 484.020, which provides treble damages for the unauthorized business of law, is unconstitutional in that it is a punitive statute yet requires no culpable mental state.
Midwest requests plain error review because it failed to raise this challenge until its motion for new trial. "A constitutional question is waived unless raised in the trial court at the earliest opportunity." Crittenton v. Reed, 932 S.W.2d 403, 406 (Mo. banc 1996) (citing Hatfield v. McCluney, 893 S.W.2d 822, 829 (Mo. banc 1995)). Midwest correctly states that our Supreme Court has granted plain error review under Rule 84.13(c) when a trial court's error has affected a substantial right and when the error resulted in manifest injustice or a miscarriage of justice. However, here, no error exists affecting substantial rights or resulting in manifest injustice. Midwest cites cases involving issues of free speech and voting rights. See, e.g., Hanch v. K.F.C. National Management Corp., 615 S.W.2d 28 (Mo. banc 1981);State ex rel. Petti v. Goodwin-Raftery, 190 S.W.3d 501 (Mo.App.E.D. 2006). No similar rights are implicated here. We decline review. Point denied.
In the interest of clarity, we will address Midwest's second and third points together. Midwest presents two points regarding the nature of its mortgage loan document procedures. In its second point, Midwest contends the trial court erred in granting judgment for the Eisels because Midwest's charge of a separate fee for the completion of mortgage loan forms did not render such activity distinct from Midwest's business as a mortgage lender and consequently did not constitute an unlawful law business. In its third point, Midwest contends the trial court erred in granting judgment for the Eisels because Midwest had a direct personal interest in the transaction. We disagree with both points.
It is the judiciary's role to define what constitutes the unauthorized practice of law. In re First Escrow, Inc., 840 S.W.2d 839, 842 (Mo. banc 1992). Nevertheless, Section 484.010.2 identifies "law business" as "drawing . . . for a valuable consideration of any paper, document or instrument affecting or relating to secular rights or the doing of any act for a valuable consideration in a representative capacity. . . ." Section 484.020.1 generally restricts the practice of law or doing of law business to those with a law license. Over time, however, the Supreme Court has created exceptions to this general prohibition.See In re First Escrow, Inc., 840 S.W.2d 839 (Mo. banc 1992);Hulse v. Criger, 247 S.W.2d 855 (Mo. banc 1952).
In Hulse, the Court held that real estate brokers could complete standardized form contracts without engaging in the unlawful practice of law. Hulse, 247 S.W.2d. at 861. In setting forth guidelines directing which documents a broker could not prepare, the Court determined the crux to be whether a broker's preparation of papers, "is ancillary to and an essential part of another business." Id. at 862. In answering this question, a court must examine, "the simplicity or complexity of the forms, the nature and customs of the main business involved, the convenience to the public, and whether or not separate charges are made. . . ." Id. Ultimately, the Court concluded that a broker, "may not make a separate charge for completing any standardized forms, and he may not prepare such forms for persons in transactions, in which he is not acting as a broker, unless he is himself one of the parties to the contract or instrument."Id. Applying its conclusions to the factual circumstances, the Court noted that the broker at issue there engaged in the unauthorized business of law. Id. at 863. The Court stated, "[H]is separate additional charges even in transactions in which he was acting as broker tend to place emphasis on conveyancing and legal drafting as a business rather than on his business of real estate broker." Id.
Later, in First Escrow, the Supreme Court revisited the issue in a different context, escrow agents. There, however, the escrow agent involved charged a flat fee for transactions no matter whether or not documents were completed. First Escrow, 840 S.W.2d at 841. The Court noted that the Hulse decision was based on two grounds, the simplicity of the transactions involved and the fact that a broker had a "sufficient identity of interest with the seller he represented to safeguard the proper completion of the transaction." Id. at 844 (citing Hulse, 247 S.W.2d at 861). The Court ultimately extended the Hulse test to escrow companies, permitting them "to fill in the blanks of certain standardized form documents . . . only if they do so under the supervision of, and as agents for, a real estate broker, a mortgage lender, or a title insurer who has a direct financial interest. . . ." Id. at 846-47.
Hulse is factually on point. As in Hulse, here Midwest charged a separate document preparation fee for loan documentation. In Hulse, the Court specifically stated in a set of enumerated conclusions that a broker may not charge a separate fee for completing forms. Hulse, 247 S.W.2d at 862. We read this to imply that charging a separate fee transforms an otherwise permitted activity into an unlawful one. The Court underscored this holding in First Escrow, stating that,"[b]oth Hulse and our opinion today bar service providers from charging a fee for preparing legal documents. . . ." First Escrow, 840 S.W.2d at 850, n. 7. From this case law we determine that charging a fee for document preparation, which includes a deed of trust, converts a service provider's work from brokering, acting as an escrow agent, or, here, acting as a mortgage lender into "an essential part of another business" in contravention ofHulse. Consequently, because Midwest charged a separate fee for creating deeds of trust and loan documentation, it engaged in a separate business detached from its mortgage lending, constituting the unauthorized business of law. In light of our interpretation of Hulse and First Escrow, the fact that Midwest charged a separate fee for its document preparation obviates the need to review the nature of, or context in which, the loan documentation was prepared.
The Missouri Legislature recently enacted Section 484.025, effective August 28, 2005, which provides, "No bank or lending institution that makes residential loans and imposes a fee of less than two hundred dollars for completing residential loan documentation for loans made by that institution shall be deemed to be engaging in the unauthorized practice of law."
Similarly, Midwest's argument regarding its personal interest defense is unpersuasive. Midwest asserts that because it maintained a personal interest in its transaction with the Eisels, it did not engage in the unauthorized business of law. Midwest misreads the law. In First Escrow, the Court indicated that a non-lawyer may fill in blanks in particular form documents when a non-lawyer has a financial interest and corresponding liability to provide a safeguard in performance. Id. at 846. However, the Court did so by referencing and expanding theHulse test which characterized the preparing of documents by a non-lawyer for a fee as the unauthorized business of law. Id. at 846-47. Possessing a financial stake in the outcome of a contract or loan does not defeat the fact that a non-lawyer charging a fee for document preparation constitutes the unauthorized business of law. Point denied.
In its fourth and final point, Midwest contends the trial court erred in granting judgment for the Eisels because the Eisels voluntarily paid the document preparation fees and were therefore not entitled to recover under the voluntary payment doctrine. We disagree.
The voluntary payment doctrine indicates, "that a person who voluntarily pays money with full knowledge of all the facts in the case, and in the absence of fraud and duress, cannot recover it back . . ." American Motorists Ins. Co. v. Shrock, 447 S.W.2d 809, 812 (Mo.App.W.D. 1969) (quoting Claflin v. McDonough, 33 Mo. 412, 415 (1863)). However, the voluntary payment doctrine is not applicable in all situations. Namely, "[t]he activities prohibited by [Section] 484.010 are not subject to waiver, consent or lack of objection by the victim." Bray v. Brooks, 41 S.W.3d 7, 13 (Mo.App.W.D. 2001). The voluntary payment doctrine is a principle based on waiver and consent. Consequently, Midwest cannot benefit from this defense. To hold otherwise, that a customer, not a mortgage lender, would be burdened with the responsibility to recognize the unauthorized business of law and be barred from recovery due to having made a voluntary payment, would be illogical and inequitable. Point denied.
III. CONCLUSION
The trial court did not err in finding that Midwest engaged in the unauthorized business of law when it charged customers a separate document preparation fee for the completion of loan forms. Although we would affirm the judgment below, in light of the general interest and importance of the issues presented we transfer this case to the Missouri Supreme Court pursuant to Rule 83.02.
Mary K. Hoff, J., Concurs.
Sherri B. Sullivan, Concurs.