CLOSING REAL ESTATE TRANSACTIONS BY LICENSED REAL ESTATE AGENTS

REAL ESTATE ‑- PRACTICE OF LAW ‑- CLOSING REAL ESTATE TRANSACTIONS BY LICENSED REAL ESTATE AGENTS 

The Washington Supreme Court's rulings in Hagen v. Kassler Escrow, Inc., 96 Wn.2d 443 (1981) andBar Association v. Great Western Federal, 91 Wn.2d 48 (1978) do not preclude licensed real estate agents from doing any of the things which their licenses permit them to do in closing real estate transactions under the provisions of chapter 18.85 RCW; however, those authorized practices may not constitutionally be construed to include the selection and completion of form legal documents, or the drafting of such documents, including deeds, mortgages, deeds of trust, promissory notes, and agreements modifying those documents.

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                                                                  January 6, 1982 

Honorable R. Ted Bottiger
St. Sen., 2nd District
8849 Pacific Avenue
Tacoma, WA 98444

Cite as:  AGO 1982 No. 1                                                                                                                  

Dear Sir:

             By recent letter you directed our attention to the November 5, 1981, decision of the Washington Supreme Court in Hagan v. Kassler Escrow, Inc., 96 Wn.2d 443 (1981) and then requested our opinion as to whether the holding in that case,

            ". . . precludes a licensed real estate agent from closing real estate transactions, completing standard pre‑printed forms or doing the usual and accustomed practice in their profession?"

            We respond to your inquiry in the manner set forth in our analysis.

                                                                      ANALYSIS

             InHagan v. Kassler Escrow, Inc., supra, the Washington Supreme Court reaffirmed its earlier ruling inBar Association v. Great Western Federal, 91 Wn.2d 48, 586 P.2d 870 (1978), that

            ". . . the selection and completion of form legal documents, or the drafting of such documents, including deeds, mortgages, deeds of trust, promissory notes and  [[Orig. Op. Page 2]] agreements modifying these documents constitutes the practice of law."1/   Accordingly, as in the earlier case, it held that those functions, commonly related to the closing of real estate transactions, may not lawfully be performed by non-lawyers‑-except in the case of persons representing themselves,pro se.

             Factually, theGreat Western case and the Kassler Escrow, Inc. case both involved the performance of such real estate closing services by corporate financial institutions or escrow companies and not by licensed real estate agents.  In our opinion, however, their reasoning must be viewed as equally applicable in all situations where the particular functions above referred to are being performed by persons who have not been admitted to the practice of law.2/   Moreover, on the basis of the Court's decision in the Kassler Escrow case, that now must be deemed to be so even in the face of an act of the legislature purporting to authorize such conduct.  For, in that case, the Court held just such a statute‑-in the form of § 1, chapter 107, Laws of 1979, 1st Ex. Sess.  (RCW 19.62.010)‑-to be unconstitutional under the separation of powers doctrine as manifested by so much of Article IV, § 1 of the Washington Constitution as provides that the ". . . judicial power of the state shall be vested in a supreme court, . . ."

             In so concluding the Court in Kassler, at pp. 452-53, explained its ruling as follows:

             "It is a well established principle that one of the inherent powers of the judiciary is the power to regulate the practice of law.  In re Bruen, 102 Wash. 472, 172 p. 1152 (1918).  See also Graham v. Washington State Bar Ass'n, 86 Wn.2d 624, 548 P.2d 310 (1976);State v. Cook, 84 Wn.2d 342, 525 P.2d 761 (1974); In re Schatz, 80 Wn.2d 604, 497 P.2d 153 (1972); State ex rel. Laughlin v. Washington State Bar Ass'n, 26 Wn.2d 914, 176 P.2d 301 (1947); In re Levy, 23 Wn.2d 607, 161 P.2d 651, 162 A.L.R. 805 (1945).  Other jurisdictions are in accord.   [[Orig. Op. Page 3]]See, e.g.,In re Kaufmen, 69 Idaho 297, 302-03, 206 P.2d 528 (1949);Public Serv. Comm'n v. Hahn Transp., Inc., 253 Md. 571, 253 A.2d 845 (1969);In re Patton, 86 N.M. 52, 54, 519 P.2d 288 (1974);State ex rel. State Bar v. Bonded Collections, Inc., 36 Wis.2d 643; 649, 154 N.W.2d 250 (1967).  The court's powers include the power to admit one to the practice of law and this necessarily encompasses the power to determine qualifications and standards.

"The court, in Graham, citing toSharood v. Hatfield, 296 Minn. 416, 210 N.W.2d 275 (1973), held that the

             "regulation of the practice of law and '"the power to make the necessary rules and regulations governing the bar was intended to be vested exclusively in the supreme court, free from the dangers of encroachment either by the legislative or executive branches."'

 "86 Wn.2d at 633.  'The unlawful practice of law by laymen is a judicial matter addressed solely to the courts.'  Washington Ass'n of Realtors, at 707.

 "Since the regulation of the practice of law is within the sole province of the judiciary, encroachment by the legislature may be held by this court to violate the separation of powers doctrine.  The separation of powers doctrine is a fundamental principle of the American political system.  For a historical discussion of the doctrine and its importance, see In re Juvenile Director, at 238-43.  We have previously held:

             "The legislative, executive, and judicial functions have been carefully separated and, notwithstanding the opinions of a certain class of our society to the contrary, the courts have ever been alert and resolute to keep these functions properly separated.  To this is assuredly due the steady equilibrium of our triune governmental system.  The courts are jealous of their own prerogatives and, at the same time, studiously careful and sedulously determined that neither the executive nor legislative department shall usurp the powers of the other, or of the courts.

              [[Orig. Op. Page 4]]

            "In re Bruen, at 478.

             "Thus, the power to regulate the practice of law is solely within the province of the judiciary and this court will protect against any improper encroachment on such power by the legislative or executive branches.  In passing RCW 19.62 [chapter 19.62 RCW], allowing lay persons to practice law, the legislature impermissibly usurped the court's power.  Accordingly, RCW 19.62 [chapter 19.62 RCW] is unconstitutional as a violation of the separation of powers doctrine."

             In terms of your present question, it is quite true that the statute which was thus invalidated did not deal, specifically, with licensed real estate brokers, associate brokers or salesmen.  Instead, apparently because it was enacted by the legislature as a response to the Court's earlier decision in Bar Association v. Great Western Federal, supra, it dealt only with the closing of real estate transactions by those organizations or individuals that were the subject of the earlier case.3/ And what the statute said that such organizations or individuals might do was as follows:

              [[Orig. Op. Page 5]]

            ". . . select, prepare, and complete documents and instruments relating to such loan, forbearance, or extension of credit, sale, or other transfer of real or personal property, limited to deeds, promissory notes, deeds of trusts, mortgages, security agreements, assignments, releases, satisfactions, reconveyances, contracts for sale or purchase of real or personal property, and bills of sale, . . ."

             Because those actions were deemed by the Court to involve the practice of law, however, the statute was declared to be unconstitutional.

             There is, on the other hand, no statute currently in effect which even purports to authorize licensed real estate agents, as such, to perform any of those functions or engage in any of those practices.  Particularly, we have examined the provisions of chapter 18.85 RCW relating to real estate brokers and salesmen and have found nothing therein which is at all comparable to chapter 19.62 RCW,supra.  The only provision of that chapter which even remotely touches on the issue is so much of RCW 18.85.010(1) as defines a real estate brokers as one who, among other things,

             "(e) Engages, directs, or assists in procuring prospects or in negotiatingor closing any transaction which results or is calculated to result in any of these acts;"  (Emphasis supplied)

             Under the Court's analysis in the Kassler Escrow case, however, this provision must be read as authorizing the performance of only such nonlegal tasks as the preparation of financial accountings, the filing of documents, or the like.4/ 

              [[Orig. Op. Page 6]]

            Summary:

             Based on the foregoing analysis, we respond to your question as follows:

             (1) The Supreme Court's rulings in Hagen v. Kassler Escrow, Inc., supra, and in Bar Association v. Great Western Federal,supra, do not preclude licensed real estate agents from doing any of the things which their licenses permit them to do under the provisions of chapter 18.85 RCW;i.e., to act as real estate brokers, associate real estate brokers, or real estate salesmen, as the case may be.5/ 

              (2) But those authorized practices may not be construed to include ". . . the selection and completion of form legal documents, or the drafting of such documents, including deeds, mortgages, deeds of trust, promissory notes, and agreements modifying these documents, . . ."6/ 

              (3) If the legislature were now to amend the laws relating to real estate brokers, associate brokers and salesmen, in an effort to authorize those individuals to do the things which RCW 19.62.010,supra, purported to authorize financial institutions and escrow agents to do, we can only anticipate that such legislation would, if challenged, also be held unconstitutional by the Supreme Court under its reasoning in Hagen v. Kassler Escrow, Inc.,supra.  For, according to the Court, it is now exclusively its function‑-and not that of the legislature as in the case of other professions7/ ‑-to define and regulate the practice of law.8/

              [[Orig. Op. Page 7]]

            We trust that the foregoing will be of assistance to you.

 Very truly yours,
KENNETH O. EIKENBERRY
Attorney General