REAL ESTATE LAW PRACTICE KEY POINTS

(JUNE 2000)

 

By Steven B. Bashaw

McBride Baker & Coles

10th Floor - One MidAmerica Plaza

Oakbrook Terrace, Illinois  60171-4710

Tel.: (630) 954-7588

Fax.: (630) 954-7590

e-mail:  SBashaw @MBC.COM

(Copyright 2000 - All Rights Reserved)

 

 

1. mortgages and consumer fraud; PAYOFF letter quote and fax fee allowed:

 

in Krause v. GE Capital Mortgage Service, Inc., (1st Dist. May 30, 2000),  Justice Frossard affirmed the trial court’s summary judgment in favor of the mortgage company. The plaintiffs were borrowers who had requested payoff statements by fax from G.E. Capital as the mortgage servicer of their loans at the time of closing and been charged a $15 quote fee and a $10 fax fee.  Arguing that these charges were not provided for in the mortgage instruments and constituted a prepayment penalty specifically waived by the language of the mortgage documents, the Plaintiffs sought a finding for breach of contract in Count I, restitution in Count II, and damages under the Illinois Consumer Fraud and Deceptive Business Practices Act, (815 ILCS 505/1 et seq.), in Count III.

 

The Defendant argued with supporting affidavits that the charges were not in the nature of a prepayment penalty, but a charge for services rendered. GE Capital’s affidavits provided that it did not charge for verbal payoff quotes or the first payoff statement in writing, but did include a $15 service or quote fee if more than one written payoff statement was requested, and an additional $10 fee for each fax transmission. Additionally, the automated telephone system from which borrowers ordered payoff letters disclosed the costs for multiple payoff and fax requests. The computer records of the defendant in this case indicated that Krause had ordered two payoff letters, both by fax, and therefore been charged a $15 payoff fee (for the second request) and $20 for fax fees (both requests). The other named plaintiff, Lindberg, had ordered a total of five payoff statements and requested three of the statements by facsimile; and were charged $15 for the multiple quote and $30 for the fax fee.

 

The opinion affirming the trial court’s ruling for GE Capital begins by noting that “A charge is a prepayment penalty if the charge imposed at the time of prepayment was one that would not have been imposed if the note were paid at maturity instead of at an earlier date”, and cites recent Minnesota and Massachusetts cases. The defendants in the case at bar did not assess these fees because the loans were paid early, but because the plaintiffs requested multiple statements and that the statements be faxed rather than mailed. Charges imposed because of a request for special services are not in the nature of prepayment penalties.  Likewise, the fact that the charges were disclosed on the automated phone service resulted in the Court’s determination that nothing was concealed, suppressed or hidden to form a cause of action for Consumer Fraud.

 

When the facts are properly understood, the decision in this case is a foregone conclusion.  What is also worthwhile reading is the Court’s distinction of other, similar cases, and handling of the equitable maxims “expressio unius est exclusio alterius” (the mention of one thing excludes another) and “contra proferentum” (an ambiguous contract is construed against its drafter).

 

 

2. New Mortgage Foreclosure Forms:

 

And, while we are considering the minutia of mortgage practice, it is important to note that on April 12, 2000, Hon. Albert Green, Presiding Judge of the Cook County Chancery Division, promulgated General Order No. 00 CH 1, which provides that commencing on April 24, 2000, particular, revised Mortgage Foreclosure Forms “shall be used in the Chancery Division and shall be furnished by the Clerk of the Circuit Court”.  Specifically, the Order refers to and attaches revisions to the Mortgage Foreclosure Summons, (form CCCH 0100A and 0100B), Verified Answer to Complaint to Foreclose Mortgage, (form CCCH 0315A), Notice of Surplus, (form CCCH 0314), and Motion for Turnover of Surplus, (form CCCH 0316), which are intended to set forth and impact the exercise of the rights of foreclosure defendants.

 

The Mortgage Foreclosure Summons and Notice of Surplus forms have been revised to provide a listing of telephone numbers for pro-bono agencies to which a defendant can turn for legal assistance; including the Chicago Bar Association Lawyer Referral Service, Cook County Bar Association Lawyer Referral Service,  Legal Assistance Foundation, Chicago Volunteer Legal Services, Chicago Legal Clinic, and the Horizon Legal Clinic.  The form also addresses the rights of the defendant to possession, ownership, reinstatement, redemption, surplus and workout options during foreclosure in plain language, and offers precautions about the fact that foreclosure is an attempt to collect a debt and may result in the defendant being “contacted by people offering to help you avoid foreclosure”.

 

The Verified Answer form is similar to forms the clerk offers for small claims cases. There is a separate statement the defendant can complete by listing the complaint paragraph numbers segregating the allegations which are admitted, those which are denied, and those about which the defendant has insufficient information to either admit or deny. Four blank lines are provided for “Other affirmative matter”, and the form must be signed and verified.  Recognizing that there is a difference of opinion between lenders and pro-bono groups about whether a pro-se defendant can or should defend himself, the form answer “at least prevents immediate default and allows the owner to receive notice and discuss alternatives”.

 

The forms relating to surplus proceeds of sale recognize that increasingly the Courts are confronted with a need to document a defendant’s right to petition the court for a distribution of those funds.  Most defendants do not have counsel at this stage of the proceedings.  The comments indicate that these two forms are intended to “demystify the process of obtaining an overpayment” and recognize that most defendants in foreclosure are unaware or unable to obtain these funds due to a lack of understanding of their rights and the appropriate procedure. 

 

 

3. Easement by Implication; Existing use at the time of severance:

 

In Emanuel v. Hernandez, (2nd Dist., May 4, 2000), the defendants appealed the trial court’s grant of summary judgment in favor of the plaintiff for  declaratory judgment that plaintiff had an easement by implication over defendant’s property. (The complaint contained two counts; Count I sought an easement by prescription over the driveway, and Count II sought an easement by implication.  The law relating to Count I was not, for some reason, discussed in the appeal.) The defendants argued that plaintiffs failed to prove all of the elements of either an easement by necessity or easement by prior existing use, and the appellate court agreed and reversed.

 

Defendants owned the property immediately north and adjacent to the plaintiff’s property.  The property line bisects a driveway between the parties’ property, and when they purchased the parcel, defendants blocked the driveway with railroad ties and began constructing a fence so the plaintiff could not use the driveway to get to their garage. The plaintiff had owned their property since 1965, and the defendants had only recently acquired their property. A common owner severed the title into the two parcels in 1890, and there was no evidence that the garage even existed before the 1920s.  The plaintiffs argued that in order to support a finding that they had an easement by implication, they need only prove that the title to both properties had once been held by a single owner, the property had been severed at some point, and, at the present time, the easement was necessary so that they could use the property without disproportionate effort or expense.  The defendant agreed that there was once as single owner, and that title had been severed, but argued that plaintiff failed to prove as an essential element that at the time of the severance of title the existing use of the property supported the easement by implication. (Apparently the plaintiffs could not prove that the driveway came into existence prior to the severance of title.)

 

Noting that “It is crucial to recognize that an implied easement is the product of the intention of the parties”, and therefore “whether an easement exists depends wholly on the circumstances at the time of the severance of title.”, the Court found that an easement by implication must arise, if at all, at the time of the severance, and a change of circumstance following the severance, no matter how great, cannot create an easement.

 

FROM DICK BALES:

 

A TITLE INSURANCE PERSPECTIVE

 

The plaintiffs in Emanuel v. Hernandez sought an easement by prescription in count I of its complaint.  Instead of seeking summary judgment on count II, relying on what truly seems to be a loser of a case (Deem v. Cheeseman), I thought at first that the plaintiffs should have stayed with count I.

 

To establish an easement by prescription, a claimant must show that the use of the land was adverse, exclusive, uninterrupted, and under a claim of right for at least twenty years.  (See, e.g., Page v. Bloom, 223 Ill.App.3d 18 (1991) or Independent Tube Corp. v. Ross and Radke, 301 Ill.App.3d 713 (1998)).  The record isn't clear as to what happened with count I.  Perhaps the plaintiffs could not establish a claim of right to that portion of the driveway that fell on the neighbors' land.  Or perhaps at one time plaintiffs were using the driveway with the permission of their neighbors. Such acquiescence would negate the necessary element of adversity.

 

The case indicates that the "defendants had recently acquired the property." How did this driveway problem slip through the closing?   The secondary market usually requires that there be a recorded agreement when the mortgaged property is burdened by a joint driveway.  And this driveway does seem to have more of the aspects of a party driveway than a mere encroaching driveway-the case indicates that at one time the parties shared the costs of maintaining the driveway.

 

How did the title company handle this situation?  Was a survey tendered at closing?  Did the defendants get "extended coverage" over the general exceptions?

 

If I were underwriting the defendants' acquisition of this property, I would raise an exception for the joint driveway on both the owners and loan title insurance policies. I cannot imagine giving any kind of endorsement over this exception for the owner's policy.  If the lender insisted on an endorsement, I would ask for information as to the value of the land, the amount of the mortgage, and then consider a "diminution" endorsement:

 

"The Company hereby insures the insured against loss or damage that the insured shall sustain by reason of the diminution of the value of the security shown in Schedule A as a result of the party driveway shown at exception in Schedule B."

 

Dick Bales, Chicago Title Insurance Company, Wheaton, Illinois

 

 

4. EASEMENTS: A PRIMER

 

The discussion with Dick Bales about Emanuel v. Hernandez was only one conversation I have had recently about easements.  Not two days later, one of my partners and I were discussing a client problem he had with an easement that was created back in the 1940s by reservation in a deed.  The grantor was then selling a portion of land in a village that had a minimum buildable lot requirement of ½ acre.  The parcel that was initially intended was a few hundred square feet short, so the grantor enlarged the parcel to be sold to meet the minimum requirement (with a variance) by giving a portion of her existing backyard to the purchaser; BUT THEN reserved an easement “for so long as the local ordinance requires a half acre buildable lot” and specifically provided that the grantor was entitled to landscape, garden, erect a fence and otherwise have the “full use and enjoyment” of the easement parcel.

 

Now, 50 years later, of course, the current owner wants to terminate the easement, and we have spent some time researching the various methods to do that.  To bring myself and the client up-to-speed on easements, I pulled out a recent copy of an article in the ATG Concept Magazine, (April, 2000, Vol.24), entitled “Easements: A Primer”.  The article begins with the general definitions and classifications of easements, (in gross, appurtenant, affirmative or negative; you remember all that, right?), and then discusses the three ways to create an easement, (express agreement, by prescription, by operation of law; a little rusty on the deed reservation, but the rest comes back quick, right?), gives the elements and a few seminal cases, before turning to termination of easements. (The concept of merger was familiar!) The article ‘rounds-out’ with a discussion of the extent of the right of use, maintenance and exclusivity.

 

This is a good overview and refresher with some case law that should get you back into the digests and on your way should you have an easement issue. (Back issues can be obtained by calling the Order Department at (800) 252-5206.)

 

5. REAL ESTATE TAX APPEALS; WEIGHT OF THE EVIDENCE:

 

In a case that seems to point to the old saying that “Figures don’t lie, but liars DO figure”, the Second District was confronted with an appeal brought by Winnebago County Board of Review of a decision by the Property Tax Appeal Board (PTAB) reducing two tax assessments on an uncompleted office building owned by Alpine Bank.  The Winnebago County Board of Review v. PTAB and Alpine Bank, (2nd Dist., May 4, 2000).

 

The Bank’s building consisted of 102,473 square feet of land improved with a three-story building.  Each floor was about 15,420 square feet, and the first floor was occupied, but the other two floors were unfinished and would have to be “built-out” before they could be occupied. The County Board of Review assessed the property for $1,184,292 based on a market value of $3,561,780 for 1997, and the Bank filed an appeal of the Board’s valuation with the PTAB as excessive.  Both the Bank and the Board submitted a report of an expert appraiser to the PTAB.  Each appraiser estimated the property’s market value according to the cost, sales comparison, and income approaches, but came up with widely divergent values. The Board’s expert valued the property at $3,430,000 based on a built-out value of $92 per square foot, (or $4,117,920), but then reduced this figure for a build-out cost of $25 per square foot plus 10% entrepreneurial profit (or $683,788), resulting in an “as is” market value of $3,430,000.  The Bank’s expert valued the property at $2,675,000 beginning with a built-out value of $81 per square foot and reducing that by a cost of $40 per square foot for build-out. The PTAB’s decision drew upon both expert’s opinions, mixing and matching the comparable sales properties from each to arrive at a $76.00 per square foot, (or $3,561,7809) market value from which it then deducted $25 per square foot for build-out, resulting in an “as is” value of $2,890,000, leading it to rule that the Board of Review assessment was excessive.

 

The issue on appeal was whether the PTAB’s decision was against the manifest weight of evidence in order to support a reversal.  While a “manifest weight of the evidence” test was accepted by the Appellate Court, they rejected that the Board of Review’s argument that the test should be whether the taxpayer proved by clear and convincing evidence (rather than a mere preponderance) that the assessment was excessive. The decision notes that the Board of Review’s argument attempts to “confuse claims of excessiveness with claims of nonuniformity.”  A taxpayer objecting to an assessment on the basis on nonuniformity must prove a disparity by clear and convincing evidence to obtain relief.  Challenges based on excessiveness of assessment valuation, however, must only be proved by a preponderance of the evidence. Here, the PTAB’s decision was that the assessment was excessive based upon a preponderance of the evidence provided by the two experts, and therefore not against the manifest weight of the evidence and must be affirmed.

 

 

6.  EMINENT DOMAIN: COST-TO-CURE AND NOMINAL DAMAGES VALUATION:

 

The Illinois Department of Transportation sought to widen and improve Highway 192 adjacent to the Bolis apple orchard in Department of Transportion v. Bolis, (3rd Dist., May 23, 2000). Filing a Complaint for Condemnation and a Motion for Immediate Vesting of Title, (“Quick Take”), IDOT sought title to 1.036 acres of a 58.6-acre farm, of which 18.747 acres was apple orchard. Of the 1.036 acres sought, 0.728 acres was already an existing public right of way, and the twelve to seventeen foot additional strip along the front of the Bolis property would result in a loss of the parking area in a semi-circular drive in front of the apple shed on the road side, eleven apple, one elm, and two poplar trees, along with a fence, a utility pole, security light, electrical service, and three signs would have to be relocated. The Bolis further argued that the front porch of the apple shed would no longer be functional as a loading dock after the taking.

 

At the trial, there was a “battle of the experts”, with the appraiser’s valuations that began with similar figures, but diverged in their opinions of the extent of damages.  The IDOT appraiser valued the taking of 1.036 acres at $2,800 reflecting the fact that 0.72 acres was already an existing public right of way and therefore the measure of compensation should be limited to “nominal value”. The temporary easement necessary for access to the roadway was valued at $265, and the damage to the remaining property based on diminution of value was $8,758; for a total suggested compensation of $11,823.  The Bolis appraiser, on the other hand, testified that the damage to the remaining property would be $61,337.16.  This valuation was based on consideration of the cost of building a new loading dock, parking lot and fence, relocating signs and a light pole and removing trees, using a “cost-to-cure” analysis. The jury awarded Bolis $41,468 comprised of $2,700 for the temporary easement, $5,768 for the taken property, and $33,000 for damages to the remaining property.

 

IDOT appealed the trial court’s ruling that allowed the jury to consider the “cost-to-cure” method of value calculation and argued that since the tract was already burdened by a public right of way, a denied jury instruction that only nominal value could be placed on the taking of the parcel was in error.

 

The decision of the Third District agreed with Bolis’ position that the cost-to-cure evidence was admissible to assist the jury in understanding the expert’s analysis and to make an accurate assessment rather than a speculative award of damages, noting that “The law in Illinois is well established that the improper admission or exclusion of value evidence in condemnation cases does not constitute reversible error when there are other witnesses and evidence as to value on both side, and the jury had the opportunity to view the property and weigh the conflicting evidence.”  Turning to the issue of the denied jury instruction on nominal value, the decision notes that the determination of proper jury instruction lies within the sound discretion of the trial court and distinguished Department of Transportation v. Lawler (a case where IDOT refused to make any payment to landowners for land already encumbered by a right of way access road), noting that IDOT was not prejudiced by the failure to give the instruction and that even its own appraiser allotted more than “nominal value” to the 0.72 acre expansion of the existing public right of way.

 

 

7. CONSTRUCTION LAW; ASSIGNMENT AND SUBROGATION:

 

Lawyers make the interpretation of words and the standing of parties as their stock and trade, but every now and then the absurdity of our efforts shines through.  In this construction case, an Insurance company attempted to argue that inasmuch as the assignor had been made whole by the assignee, there was no “loss” to assign, and that since the damages sought were the obligation of the plaintiff under the contract there was no basis for “subrogration”.  Both arguments were rejected.

 

The Board of Education entered into a contract for the construction of a middle school building with Maggio as a general contractor in the facts of A.J. Maggio Company v. Coy Willis, (1stDist.,May23,2000).  Maggio subcontracted with Willis to for the construction of the sanitary and storm sewer. The subcontract provided that Willis would perform the necessary corrective work if the materials or workmanship it furnished were deemed inadequate; and if Willis failed to perform the corrections Maggio could deduct the cost of making the corrections from the sums due to Willis. Willis was also required to provide comprehensive general liability insurance naming Maggio and the School Board as an additional insured.  Willis failed to provide coverage to Maggio as required, but did insure the architect and Board of Education.

 

Shortly after Willis completed the sanitary and storm sewers, sinkholes appeared; Maggio requested Willis correct the situation, and Willis refused.  Maggio performed the corrective work as demanded by the School Board pursuant to the terms of the general contract, and incurred costs of $497,067 that it billed to Willis. After Maggio paid the $497,067 for the corrective work, the School Board, which was named as an additional insured under Willis’ policy, executed a written assignment of its cause of action under the policy to Maggio.  Maggio filed suit for breach of contract against Willis, and included a third-party breach of contract, assignment of cause of action, and subrogation of cause of action against Willis’ insurer. The Insurance Company, noting that the school never incurred a loss because Maggio corrected the problem as required under its contract, argued that there was nothing to assign after Maggio had the damage repaired, and, like wise, there was nothing to which Maggio could be subrogated.  The trial court granted the insurance company’s motions to dismiss the derivative counts for failure to state a cause of action based on the assignment and subrogation.

 

The Appellate Court rejected both arguments and reversed giving us some good law about assignments and subrogation.  An assignment is the transfer of some identifiable property, claim or right from the assignor to the assignee. The assignee can obtain no greater right or interest than that possessed by the assignor. Nonetheless, an insured’s claim under a policy of insurance may be assigned after a loss.

 

Subrogation is a method whereby one own has involuntarily paid a debt or claim of another succeeds to the right of the other with respect to the claim or debt so paid. While subrogation is only available where the plaintiff is under a legal obligation to pay the debt of another, despite the insurance company’s argument that Maggio was actually only paying its own debt as an obligation to correct any defects during construction in its contract with the School Board, it is nonetheless clear that Maggio was under a legal obligation to pay for the School’s damages and entitled to subrogation of its claims against Willis.

 

 

8. ADVERSE POSSESSION; VACANT LAND AND PAYMENT OF TAXES WITH COLOR OF TITLE:

 

In a case that goes up on appeal relating to whether the Defendant should have been granted an order vacating a default judgment under Section 2-1301(g) of the Code of Civil Procedure, we nonetheless find a lot of good law on the defense of an action to quiet title based upon statutory (rather than common law) adverse possession. In Jones v. Unknown Heirs or Legettees of Fox, (3rdDist.,April 28, 2000), the trial court entered a default judgment in favor of the plaintiff claiming adverse possession. Jurisdiction was based upon publication notice against Unknown Heirs or Legettees this action to quiet title to a seven and a half acre parcel of land in Peoria. Wesley Fox, a purported heir of the defendant Maymee Fox filed a motion to vacate the judgment, which was denied by the trial court.  On appeal, the decision of Justice Slater reversed the denial, finding that the defendants had not received actual notice of the proceedings and only been served by publication. Accordingly, the motion to vacate should have been evaluated by the trial court under the “liberal ‘substantial justice’ (between the parties) standard” under Section 2-1301(g), rather than the stricter requirements of a 2-1401 motion.  Here, the Court found that the defendant had established the existence of a meritorious defense, for which ‘substantial justice’ requires a trial on the merits rather than a default judgment.  The “meritorious defense” consideration is what makes this case worthy of study.

 

Turning first to the provisions of 735 ILCS 5/13-110 “Vacant land—Payment of taxes with color of title”, the Court notes that whenever a person having color of title pays all taxes for 7 successive years, they shall be deemed to be the legal owner of vacant and unoccupied land. Here, however, the Defendant raised an issue of fact by alleging in his motion to vacate that he believed either he or his mother had paid taxes for at least one of the seven years in question, and therefore “substantial justice” required the default judgment be vacated in favor of a trial on the issue.

 

Section 13-110 also requires possession “of such a nature as to place others claiming title upon inquiry”, and here the motion to vacate was accompanied by an affidavit of a neighboring land owner that over an eleven and a half year period she had only been aware of two occasions of persons entering onto the property; negating the plaintiff claim of the requisite possession. This was sufficient to raise an issue to controvert plaintiff’s claim that they had taken and maintained possession of the property so that “substantial justice” required the default be vacated in favor of a trial on the issue. Likewise, an allegation by defendant that his father had placed a fence on the property line within the adverse possession period raised a factual issue which “weighs in favor of granting the motion to vacate the judgment.” on the issue of requisite possession.

 

Accordingly, substantial justice required the motion to vacate be granted in order to compel the plaintiff to got to trial on the merits. In the process, a nice analysis of the application of Section 13-110 of the “Real Actions” portion of the Code of Civil Procedure is provided by the facts of this case.

 

 

9. LANDOWNER’S DUTY OF CARE:

 

Last year, in Bartelli v. O’Brien, (2nd Dist., Sept. 1999), 718 N.E.2d 344, 240 Ill.Dec. 863, a property owner sued an adjacent landowner alleging that the landowner was negligent in failing to prevent a fire that originated from the defendant’s hotel, from causing damage to the plaintiff’s property. The decision held that a landowner has a commonly-law duty to use reasonable means to prevent the spread of fire to adjacent structures and reversed the trial court’s grant to summary judgment, holding that defendant’s failure in these specific circumstances to maintain fire detection and prevention equipment was actionable negligence. There was a dissent on the issue of the common law duty of a landowner to install and maintain smoke detectors and fire extinguishers to reduce fire damage to adjacent property. The case reversed on the summary judgment and remanded the case for trial, so it may be the subject of a future decision.

 

In Calhoun v. Belt Railway Company of Chicago, (1st Dist., May 31, 2000), the issue of duty of care owed to others on land is also discussed in a manner that may be instructive to real estate practitioners.  Here, a 12-year-old boy’s leg was amputated by virtue of injuries suffered when he was playing on railroad tracks and cars. The trial court granted summary judgment in favor of the railroad carriers based on the fact that neither of them owned or controlled the land and tracks over which their cars rode and upon which the child was injured.

 

Notably, the decision sets for the standard for determining the liability of an owner, occupier or controller of land to children injured on their premises. The Kahn doctrine, (with reference to Kahn v. James Burton Co.,) provides the rule that the measure of liability for those who own, control and maintain property is based upon the reasonable foreseeability of harm; effectively abolishing the “attractive nuisance” doctrine as the benchmark of liability “and further obviating the need for classifying the child’s status as either invitee, licensee, or trespasser.”, in harmony with the Second Restatement of Torts.  Here, “a reading of Kahn clearly reveals that a duty to exercise reasonable care for the protection of children runs only to one who either owns, occupies, or controls the land upon which the dangerous condition exists.  Absent ownership, possession, or control, no duty arises and liability cannot attach.”  The operating agreements between the railroads in this case did not give the defendants control of the tracks, and they neither occupied nor owned the land; they were simply granted permissive use of the tracks, and this was not sufficient to establish liability as a matter of law.

 

While I am not fond of read personal injury cases or considering property damage issues outside of the context of obtaining adequate insurance, I would nonetheless suggest these two, instructive cases for your reading.

 

 

10.  UPDATES OF ALL KINDS:

 

In April we reported the case of Dottie’s Dress Shop, Inc. v. Village of Lyons with some good humor and especially relished in some of the references to the fact that Dottie’s was definitely not a dress shop, and distinct from Walgreen’s (which sells condoms), Marshall Fields, (which sells lotions and candles), Toy-R-Us, (which also sells “toys”), Jiffy Lube, (which sells lubricants), or hobby shops allowed in a business rather than an “adult use” zone.  This month (1st Dist., May 26, 2000), the opinion was re-issued as “MODIFIED UPON DENIAL OF REHEARING”.  The opinion appears to be identical, and doesn’t indicate the basis for a rehearing request or denial; but it was fun/prurient to read again.

 

The “turf battles” between Realtors and attorneys appears to be continuing if not actually heating-up.  Despite calls to do so and a meeting to discuss resolution, Koenig and Strey still has not issued a formal retraction of their “Closing Myth No. 1 – You don’t need a lawyer at closing” memo, although their executive officers have indicated that they do not want to engage in a battle with the likes of IRELA and the Illinois State Bar Association.  This month, the convergence of Multidisciplinary Practices issues and the efforts by Realtors to promote "One-Stop-Shopping" at the expense of attorneys and the consumer/clients has moved to a new level. An attorney who characterizes herself as “an employee of Burnet Title LLC” writes to sellers on the eve of closing “Re: Document Preparation Services” to “confirm that you have retained me for the limited purpose of preparation of you documents for closing”. In an attempt to limit liability the letter states “It is understood that I am not going to be present at your closing and I am not in a position to provide you with any advice regarding issues that may arise at the closing table.”  This is clearly an ethical problem as addressed in ISBA Opinion 94-1:

 

“Opinion No. 94-1

 

July 1994 Topic: Unauthorized Practice of Law; Conflicts of Interest; Limitation of Scope of Representation

 

Digest: A lawyer aids in the unauthorized practice of law, and may violate rules pertaining to confidentiality, conflicts, and the duty to communicate with and explain matters to a client, by limiting his role in a real estate transaction to the drafting of documents and delegating the gathering and dissemination of information, the resolution of problems arising from such the documents drafted, and other problems which may arise at the closing, to the real estate broker.

 

Ref.: Illinois Rules of Professional Conduct, Rules 5.5(b), 1.4(b), 5.4(c)”

 

This letter clearly violates the prohibition of aiding in the unauthorized practice of law and the duties an attorney owes to his or her client. The attempt to “limit” one’s scope of representation is used often and properly by attorneys in their retention agreements, but the effort here is clearly inappropriate.  A further issue is revealed by the “disclosure” that “I am also an employee of Burnet Title LLC and performing this work for you will benefit the company I work for to the extent that I am assisting in facilitating your closing.  Please sign where indicated below to indicate your receipt and acknowledgement of the terms of this letter.”  Now there is an example of a conflict of interest so clear that it is only overshadowed by the meaningless “disclosure” and attempted “waiver”!

 

John O’Brien of IRELA indicates that this is NOT a isolated incident, and IRELA is interested in hearing from attorneys who have experience with similar improprieties. (You may call John at (847) 593-5750, fax him at (847) 593-5171, or e-mail at jobattny@aol.com)