In a case that drew a scad of amicus briefs, the Michigan Supreme Court has reversed the court of appeals and held that a lender does not practice law by completing standard mortgage documents and charging the borrower a document preparation fee. The decision is likely to influence other states.
Paul and Theresa Dressel got a loan from Ameribank, which charged them $400 for preparation of the note, mortgage and other loan documents. The Dressels sued, saying that by charging the fee for preparation of the loan documents, Ameribank was practicing law without a license. The Dressels got a class certification. The trial court gave Ameribank summary judgment, which was overturned by the court of appeals in a decision reported in the October, 2001 issue. The Supreme Court reversed again.
Michigan law makes it illegal for a corporation or association to practice law, except through staff attorneys. The law does not define the practice of law, however.
The court of appeals placed heavy emphasis on the fact that Ameribank charged for doc prep, citing earlier Michigan decisions holding that the charging of a fee is a good indicator of the practice of law. The Supreme Court rejected the rote approach, and ventured into the deep waters of defining the practice of law. It began with a history of American law on regulation of the legal industry, noting that recent laws on the subject were adopted at a time when lay practitioners had become an increasing menace.
The court ruled that the drafting of pleadings and the giving of legal advice were clearly the practice of law. It said: "[w]e agree and reiterate that a person engages in the practice of law when he counsels or assists another in matters that require the use of legal discretion and profound legal knowledge."
It ruled that document drafting, by contrast, falls into two camps: wills and other custom documents clearly involve the practice of law, but not so "the ordinary run of agreements [used] in the every day activities of the commercial and industrial world." Rather,
Drafting simple documents, which drafting does not entail giving advice or counsel as to their legal effect and validity, is not the practice of law.
Specifically, the preparation of ordinary leases, mortgages and deeds do not involve the practice of law
They have become "'so standardized that to complete them for usual transactions requires only ordinary intelligence rather than legal training.'"
To insist that only a lawyer can draft such documents would impede numerous commercial transactions without protecting the public,
i.e., would not further the purpose of restricting the practice of law to trained and licensed attorneys.
The court found that the Dressel loan documents fell in the category of simple commercial documents:
Plaintiffs do not assert that the bank's preparation of their mortgage document was in conjunction with anything other than an ordinary transaction in the normal course of the bank's business. The bank's employees did not draft the mortgage document. They merely completed a standard form document that the federal government compiled and that is readily available to the public. In performing the act of completing the standard form mortgage, defendant was acting as an amanuensis, a kind of secretary for plaintiffs. No legal knowledge or discretion was involved in the document's completion. The bank did not counsel plaintiffs with regard to the legal validity of the document or the prudence of entering into the transaction. In general, the completion of standard legal forms that are available to the public does not constitute the practice of law.
Accordingly, defendant was not practicing law when it completed the mortgage form at issue in this case. Moreover, because defendant was not practicing law when it completed the mortgage, it was not engaged in the "law business." It is immaterial that it charged a fee for its services. Charging a fee for nonlegal services does not transmogrify those services into the practice of law.
A concurring justice criticized the majority for attempting to define the practice of law, saying "[c]onstant new developments in society, technology, business, and the law preclude any chance of arriving at a lasting definition."
Dressel v. Ameribank, ___ N.W.2d ___, 2003 WL 21456614 (Mich.).
