Wisconsin Lawyer
Vol. 83, No. 5, May 2010

You are not going to believe this one. A week ago a young couple came in to the office. They had financial problems: he was recently bankrupt and she was recently divorced. They wanted to buy a farmette.

Not to worry. They went to the Internet and found a guy who would help them find property without the need for a mortgage. They met the guy, whom I will refer to as “agent.” Here was the deal: they would put down $10,000 and make payments, then refinance the deal at the end of a year. It looks orthodox, doesn’t it?

They did not have the $10,000. Not to worry, the agent gave them $10,000 in cash (in a suitcase, just like in the movies) at the closing. They signed over their truck and boat in exchange. The $10,000 then went to the seller, Sally Smith, who deposited it in her account, made a cash withdrawal of $10,000, and then gave it back to the agent. I assume this was the commission.

The agent then drafted the paperwork. He provided a two-page “Owner Finance Contract,” replete with phrases and paragraphs apparently lifted from some Internet site. The deal was structured like this: Buyer would take possession of the farmette at N222 Duncan Road. (It turns out the “farmette” was a 10-acre parcel on the certified survey map, but the agent couldn’t use that legal description very well because the seller planned, and did, after the closing reconfigure the lot to a three-acre plot.) The contract was not recordable for several reasons.

The buyer was not really buying land but instead was buying the “beneficial interest” in the “N222 Duncan Road Trust.” The buyer was to execute a deed to the trust and leave the deed with Sally Smith so that, should the buyers not perform properly, Sally could simply record the deed. The agent drafted the deed, too. I haven’t seen it.

But I have seen the Warranty Deed from Sally Smith to the trust (drafted by the agent). By the deed, Sally “aliens, remises, releases and confirms” title to the trust “known as Trust Number 222.” Never mind that Sally had a quarter of a million dollar mortgage on the property – it wasn’t mentioned. I checked and the prior mortgage did contain the standard “due on sale” provisions.

The deal had some other cute features – for example, the buyer could renew the contract, but no explanation was given for how many times or for how long. Someone was to pay the taxes – in one paragraph it was the seller and in another the buyer. No interest rate was stated. The contract was not even called a land contract, a lease, a lease with option, or anything else you might recognize.

The buyers were to refinance at the end of a year with a loan shark that had a relationship with the agent. We do not yet know exactly what that relationship is.

During the one-year life of the contract, Sally continued to use the property, and even harvested trees from it.

This will come as a surprise to all of you, but the deal went south. All payments were made on time (or within the grace period) but Sally gave the buyers a 30-day notice to get out.

A quick check reveals that the agent is not a registered loan broker, not a realtor, and not a lawyer. There are mechanisms to report him for plying two of the three trades without a license. Guess which one is completely unregulated? You got it – only when wearing his lawyer’s hat is the guy above the law. Look it up for yourselves: Wis. Stat. section 757.30 prohibits practicing law without a license – but he didn’t do that. He didn’t appear in “any action or proceeding in or before any court of record.” And he didn’t call himself “attorney at law, lawyer, solicitor, counselor, attorney” or any of the other prohibited monikers.

I may not be able to accomplish everything I set out to accomplish as your State Bar president, but I think I can do something about the unauthorized practice of law. You are aware that on March 8, the State Bar appeared before the Wisconsin Supreme Court on your behalf and on behalf of the consuming public, and tried to get a definition of the practice of law from the court, so that section 757.30 will have some teeth. The court unanimously adopted its own working draft of the definition and indicated it is receptive to further entreaty from the State Bar this spring. We will be there. Some of our Unauthorized Practice of Law Committee members have spent 20 years working on this problem, and we will not quit until the supreme court turns us away. I do not think the justices will do that. As divergent as the views are on our court, as different as the personalities are, and as internally conflicted as they are about the public policy of the court, the justices all seem to understand that the public must be protected not only from charlatans who pretend to be lawyers but also from those who, in fact, practice law without a license. Keep your fingers crossed. We won’t give up.

Wisconsin Lawyer