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Missouri Supreme Court Resurrects Lawsuit Alleging Unjust Enrichment by Mortgage Broker- Hargis v. JLB Corp.

January 13, 2012

Vincent Howard and our team of Moreno Valley predatory lending lawyers were interested to see a recent ruling out of Missouri permitting an unjust enrichment claim against a mortgage broker. In Hargis v. JLB Corp., Bonnie Hargis also originally alleged unauthorized practice of law by JLB, saying it prepared legal documents. The trial court ultimately rejected this claim, finding that third parties not under JLB's control prepared the documents, and the Missouri Supreme Court upheld that ruling. However, it reversed summary judgment as to Hargis's unjust enrichment claim, saying this claim was not related to unauthorized practice of law and JLB did nothing to rebut it in its motion.

JLB is a mortgage broker that helps borrowers prepare financial documents. Loans also require a note and mortgage or deed of trust, but the Missouri Supreme Court noted that the record appears to show JLB relied on third parties like title companies to prepare those legal documents. In 2009, Hargis used JLB to refinance her home in Barnhart, Missouri, for which she was charged a $1,890.50 loan origination fee; a $1,923.58 loan discount; a $900 broker fee; a $550 underwriting fee; a $208 administrative fee; and an $899 processing fee. JLB said it did not charge for the preparation of the legal documents, but charged the processing and administrative fees for gathering information, transferring documents and helping to prepare loan application documents. Hargis, however, was dissatisfied with the fees and filed suit, alleging JLB practiced law without a license when it charged her for preparation of the legal documents; and was unjustly enriched by charging for services not provided. After discovery, the trial court granted summary judgment on all counts, finding JLB did not draft the legal documents.

The Missouri Supreme Court noted that Missouri caselaw has allowed mortgage brokers to fill out legal forms in the past, as long as -- among other things -- they did not charge a higher or separate fee for helping to fill them out. In this case, Hargis claims that JLB charged her for procuring or assisting with the preparation of legal documents. This raises the issue of what it means to "procure" a document, the court said. After considering past cases, it ultimately decided procuring requires active involvement in obtaining something; it's more than the mechanical act of gathering information. And the record on summary judgment shows that JLB outsourced the legal document preparation, and did not charge for this or roll the cost into another fee. Other documents for which Hargis was charged are not legal documents, it said. Thus, it upheld the trial court on the law practice counts. However, it reversed on the unjust enrichment claim. JLB's summary judgment motion did not address the unjust enrichment claim, the high court said -- and her claim does not rely on the unauthorized practice of law. Thus, it sent that issue back to the trial court.

Led by partner Vincent Howard, our Lake Forest predatory lending attorneys handle many cases of borrowers alleging underhanded behavior by lenders and mortgage brokers. However, claims for unauthorized practice of law were not common even in the worst days of the mortgage crisis. It's not unreasonable to suggest that the kind of practices described here as illegal -- the active procurement of legal documents by nonlawyers -- went on during the mortgage bubble, particularly among lenders and brokers that used high-pressure sales tactics and filled out forms on behalf of their clients. This issue may surface as more and more borrowers turn to the courts and Escondido predatory lending lawyers like us.

If you believe you were misled, overcharged or otherwise deceived when you took out a loan, call Vincent Howard and the team at Howard Law, P.C., to discuss how we can help. You can reach us at 1-800-872-5925 or send us a message through our website.

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