Untitled Texas Attorney General Opinion ( 1941 )

OFFICE OF THE ATTORNEY GENERAL OF TEXAS
ADSTIN
Gerald C. Mann
Attorney General
Honorable D. Richard Voges
County Attorney
Wilson County
Floresville, Texas
Dear Sir: Opinion No. O-3984
Re: Can an injunction be secured
to restrain a corporation
from soliciting legal work
for itself or for its attOP-
neys and from practicing law?
You have asked the opinion of this department on the abo’io
and related questions contained in your letter of September 6, 19?~1,
from which we quote:
“On the facts herein stated, and questions ask-
ed, will you please give me an opinion:
” ‘AI Company, a corporation is engaged in the
business of printing stationery and selling office
supplies, in connection with its printing business,
its agents solicit the printing of Bonds and Warrants.
A prospective customer is about to issue warrants, and
in determining the cost of the printing of such war-
rants, it is stated by the soli.ci.ting agent, that the
co& of the printing would be $34.00; and that the
legal work could be done in Austin for $30.00; that
the prospective customer could get the legal work done
in Austin for the sum of $30.00; that this legal work
would include all of the legal work, but would not in-
clude a Bond Attorney’s Opinion. It is not stated who
the attorney is, nor is it stated that the prospective
cus:omer would have to see the attorney, or that the
customer would have to make any arrangem,ents. In
other words, the impression is left, that the printing
house would furnish all the legal work for the sum of
$30.00.
Honorable D. Richard Voges, Page 2
'Does this constitute practicing law?
"Can the Corporation or its soliciting agent be
proslecutedunder the existing law?
"Can an injunction be secured restraining such
corporation from so soliciting legal work, for itself;
or for its attorneys, and from practicing such law?"
Your first question is answered in the affirmative by our
Opinion No. O-831, written by Robert E. Repke, Assistant Attorney
General, and addressed to Honorable J. P. Bryan, County Attorney of
Brazoria County. Since that opinion deals with a fact situation
which is very similar to that outlined by you (except for the bond
attorney's opinion) we take the liberty of quoting from it at
length:
"In your letter you make the following state-
ment:
"For a certain sum, say one per cent of the
amount of the bond issue, the bond broker will enter
into a contract with Brazorla County to work out a
schedule of the amount and type of bond to be sold
for the particular project suggested, and then procure
the services of an attorney to prepare the various
orders, notices and other instruments required to make
up the transcript of the bond proceeding, pay the
costs of the election, printing of the bonds and fur-
nish the opinion of a recognized bond attorney. It is
conceivable that the various orders to be passed by
the court, the notices, etc., which make up the trans-
cript could be prepared by a person not an attorney;
however, all proposals that have been made to the Com-
missioners' Court of this County have been that the
brokers will furnish acceptable attorneys to prepare
the transcript of the proceedings. As I understand
it, perhaps more than half of the costs of proceedings
contract will go to pay attorneys' fees.'
"You further state that the parties who contract
with the county in the above described manner are not
licensed to practice law, but are individuals who are
interested in purchasing bonds. You request our opinion
.
Honorable D. Richard Voges, Page 3
as to whether or not such contracts are illegal as
constituting contracts providing for unlawful prac-
tice of law by unlicensed persons.
“It being admitted that the persons who enter
into the proceedings contracts described in your letter
are :notlicensed to practice law, the first question to
be determined is whether or no,t the undertakings which
such persons have contracted to perform on behalf of
the county of Brazoria amount to ‘practice of law.’
“The ‘practice of law,’ as generally understood,
is the doing or performing of services in a court of
justice in any manner depending therein throughout its
various stages and in conformity with the adopted rules
of procedure; but it is not confined to performing serv-
ices in an action or proceeding pending in courts of
justice and, in a larger sense, it includes legal ad-
vice and counsel and the preparation of legal instru-
mentv and contracts by which legal rights are secured
although such matters may or may not be pending in any
court. 7 C. J. S. p. 703.
“The practice of law has also been defined as
follows:
“‘In litigated matters it involves not only the
actual representation of the client in court, but also
services rendered in advising a client as to his cause
of action or defense. The practice of law also includes
the giving of advice or rendering services requiring
1 138 Han. 899,
the use of legal skill or knowl.edge.
page 907, 28 P. (2d) 765, 769.
“The foregoing definitions or substantially simi-
lar ones have been repeatedly approved by the appellate
courts of numerous states. Some of the decisions which
have approved one of the foregoing definitions of the
practice of law or substantially similar ones, are here-
with cited:
“In Re: Opinion of the Justices (Mass.) 194 N. E.,
313; Rhode Island Bar Association v. Automobile Service
Association (Rhode Island) 179 A. 139; Eley v. Miller,
34 N.E. 836; Paul v. Stanley (Washington) 12 Pa. (2d)
401; People v. Peoples Stock Yards State Bank (Ill.)
Honorable D. Richard Voges, Page 4
1.76N. E. 911; Crawford v. McConnell (Okla.) 49 Pac.
(2d) 551; Childs v. Smeltzer (Penn.) 171 A. 883;
Cain v. Merchants Nat’3 Bank & Trust Co. of Fargo
N. Dak.) 268 N.W. 719; Re: Eastern Idaho Trust Co.
IIdaho) 288 P. 157; Fitchette v. Taylor (Minn.)
254 N.W. 910.
“In Texas by statute, Article 43Oa, Penal Code
of Texas, the practice of law is prohibited by any
corporation, person, firm or association of persons
except natural persons who are members of the Bar re-
gulal?lyadmitted and licensed to practice law. Sec-
tion 2 of Article 430a provides as follows:
“‘For the purpose of this Act, the practice of
law :Lsdefined as follows: Whoever (a) In a repre-
sentative capacity appears as an advocate or draws
papers, pleadings, or documents, or performs any act
in connection with proceedings pending or prospective
befo:rea court or a justice of the peace, or a body,
board, committee, commission or officer constituted by
law ,andhaving authority to take evidence in or settle
or determine controversies in the exercise of the
‘udicial powor of the State or subdivision thereof; or,
b) For a consideration, reward or pecuniary benefit,
i’
present or anticipated, direct or indirect, advises or
counsels another as to secular law, or draws ‘1paper,
document or instrument affecting or relating to secu-
lar rights; or, (c) For a consideration, reward, or
pecuniary benefit, present or anticrpated, direct or
indirect, does any act in a representative capacity in
behalf of another tending to obtain or secure for such
other the prevention or the redress of a wrong or the
enforcement or establishment of a right; or (d) For a
consideration, direct or indirect, gives an opinion as
to the validity of the title to real or personal prop-
erty, or (e) As a vocation, enforces, secures, settles,
adjusts or compromises defaulted, controverted or dis-
puted accounts, claims or demands between persons with
neither of whom he is in privity or in the relation of
employer and employee in the ordinary sense; is prac-
tici.nglaw. . . .I
“We believe it requires no extended argument to
establish that the preparation of orders, notices and
. .
Honorable D. Richard Voges, Page 5
other instruments which are necessary to give valid-
ity to an election to authorize the issuance of bonds
are matters which require legal skill and learing on
the part of the person undertaking to prepare such
instruments. The various constitutional and statutory
provisions with respect to the proceedings necessary
to a valid issuance of bonds must be strictly complied
with, and it is a matter of common knowledge in the
lega:.profession that the field of bond law is a spec-
ialized and technical one which requires experience and
study by a trained m,ind as a prerequisite ,tothe prac-
tice of such branch of the law. It seems plain to us
that a person who undertakes to supervise all of the
necessary steps leading up to a bond election and the
issuance of bonds thereunder, including the preparation
of necessary orders, notices and other instruments and
the furnishing of a legal opinion upon the validity of
a bond issue is unmistakably undertaking to practice law.
“We reach this result whether we accept as the
controlling definition of the practice of law that
definition set forth in Section 2 of Article 430a, Tex-
as Penal Code, or, independently of the statute, the
definitions which have been announced and approved by
various appellate courts throughout the United States.
We believe that no serious contention can be made to
the effect that subdivisions (b) and (c) of Section 2
of Article 43Oa, Penal Code of Texas, are not violated
by the undertakings contained in the contracts describ-
ed in your letter insofar as such contracts provide for
the drawing of orders, notices and other legal instru-
ments and the furnishing of legal opinions upon the
validity of the bond issue.
“The most recent discussion by a Texas Appellate
Court of a question analogous to the one presented in
your opinion request is found in Montgomery v. Utili-
ties Insurance Co., 117 S. W. (2d) 486, by the Beau-
mont Court of Civil Appeals. This case is now pending
for decision in the Supreme Court of Texas. In the
Montgomery case, an insurance company having issued a
liability policy in which it agreed to investigate all
accidents and claims covered by the policy and to de-
fend its assured free of cost in any action brought to
reco~vera loss covered by the policy, subsequently
Honorable D. Richard :Voges, Page 6
entered into an independent agreement with the assured
whereby the insurance company agreed to defend any
suit brought against its assured as a result of a cer-
tain collision. Such independent agreement was term-
ed a ‘non-waiver’ agreement, and it further provided
that .theinsurance company should negotiate a settle-
ment of the claim against its assured, and failing
in such endeavor, that the insurance company would
select and employ lawyers of its own choice to defend
the case. However, the insurance company did not agree
or bind itself to pay any judgment or court costs re-
sulting from said suit. Attorneys selected and employ-
ed by the insurance company subsequently defended a suit
brought against the assured, and in such suit judgment
was rendered against the assured. The owner of such
judgment then instituted suit ,thereonagainst the in-
surance company. In holding that the non-waiver agree-
ment was illegal and invalid, the Court said:
“‘That agreement, by its terms and by the construc-
tion placed upon it by the insurance company itself in
its pleadings in the present suit, was a contract to
prac t:Lcelaw. It was therefore in violation of the pen-
al statutes of this state which make it unlawful “for
any corporation or person, firm, or association of per-
sons, except natural persons who are members of the bar
regularly admitted and licensed, to practice law. Acts
&3rd l$ssg,p. 835, Ch. 238, Vernon’s Ann. Penal Code,
Art. . Being in contravention of the statute the
agreement was illegal and of no effect.”
“1 * * ** A corporation cannot practice law, and
of course it cannot legally contract to do so. State
v. C. s. Dudley & co. Inc. 340 MO. 852, 102 S.W. 2d)
8%; State ex rel. v. Retail Credit Men’s AssIn, 1A3
Tenn. 450, 43 S. W. (2d) 918; Boykin v. Hopkins, 174 Ga.
511, ~62 S. E. 796; In re Co-operative Law Co., 198
N.Y. 479, 92 N.E. 15, 32 L. R. A. N. S. 55, 139 Am.
St. Rep. 839, 19 Ann. Cas. 879; Eley v. Miller, 7 Ind.
App. 529, 34 N.E. 836; Richmond Assn. of Credit Men,
Inc. ‘7.Bar Assn. 167 Va. 327, 189 S.E. 153; State ex
rel v. Merchants’ Protective Corporation, 189 Cal. 531,
209 P. 363; Bennie v. Triagle Ranch Co. 73 Colo. 586,
216 P. 718; In re Otterness, 181 Mix-n.254, 232 N.W.
318, ‘73A. L. R. 1319; Black & White Operating Co. Inc.
v. Grosbart, 107 N. J. L. 63, 151 A. 630.’
-
Honorable D. Richard Voges, Page 7
"l* * ** And since a corporation cannot practice
law directly it cannot do so indirectly by employing
competent lawyers to practice for it. That would be an
evasion which the law would not tolerate. 2 R.C.L. 946;
State v. C. s. Dudley & co. Inc. 340 MO. 852, 102 S. W.
(2d) 895. The intervention of a corporation as general
emplcyer of the attorney between him and the client is
destructive of the necessary and important relation of
trust and undivided loyalty which must exist between
attorney and client. "Divided obli&ations in trust re-
latic'nsare obnoxious to the law, and in none more SO
than in that of attorney and client.' People v. Peoples
Trust,Co., 180 A.D. 494, 167 N. Y. s. 767, 768.'
‘1* + * ,”
"In the recent case of Rhode Island Bar Association
v. Automobile Service Association (Rhode Island), 179
A. 139, an exhaustive and able discussion and review
of the history of the decisions and reasons for prohibit-
ing t,hepractice of law by unlicensed persons is found.
In .tktat
case an automobile service association, for a
stated annual fee, agreed to furnish legal counsel free
of charge to represent and defend members of the associa-
tion in cases involving violations of traffic laws, and
also agreed to furnish such counsel for the purpose of
prosecuting and defending, on the part of the member,
claims and suits for damages for and against the members.
The Court after quoting the contract in detail says:
"'E~tchof the several numbered paragraphs of the
respondent's (A.S.A.) contract with its customers calls
for legal service of some kind, except paragraphs 3, 6
and 1.1. True, this legal service is to be rendered not
by them personally, but by counsel designated by them.
Ostensibly such service is free, but actually it is by
far the major part of the consideration which the CUS-
tomer receives for his membership fee. Out of eleven
(Note: In the Montgomery case, quoted from above, the decision of
the Court of Civil Appeals has since been reversed by the supreme
Court (138 S. W. (2d) 1062), on the ground that the Insurance company
was defending the suit to protect its own interest, rather ,thanthat
of the insured. But we think the authorities cited by the Court Of
Civil Appeals in that case are applicable to the facts you give.
-
Honorable D. Richard Voges, Page 8
paragraphs, only three are not of a legal nature, and
two of those are so inconsequential as to be disregard-
ed.
“‘These respondents then are engaged in selli~ng
legal advice and assistance in association with a’duly
licenisedmember of the bar of this court. Their as-
socia~tionwith this member does not absolve them from
respo:asibility. We see no difference in their case
from that of the respondent in Re Co-operative Law Co.
1910 198 N.Y. 479, 92 N.E. 15, 16, 32 L. R. A.
,I N.S. 1 55, 139 Am. St. Rep. 839, 19 Ann. Cas. 879, where
the court says: “The relation of attorney and client
is th,stof master and servant in a limited and dignified
sense, and it involves the highest trust and confidence.
It cannot be delegated without consent, and it cannot
exist between an attorney employed by a corporation to
practice law for it, and a client of the corporation,
for he would be subject to the directions of the corp-
oration, and not to the directions of the client.“’
“In another place in the opinion, the Court says:
” ’Thus, indirectly through the respondent Morris,
they have been assuming to conduct a law practice on a
wholesale business scale reaching throughout the state.
What these respondents cannot legally do directly they
may not do indirectly. They say they have conducted
this business for twelve years without interference.
This may well be, but mere length of time does not and
cannot convert into a legal act what is illegal.’
“In view of the above cited authorities and others
too numerous to quote in this opinion, we are constrain-
ed to hold that the contracts described in your letter,
insofar as such contracts provide for the furnishing of
legal opinions on bond issues and for the preparation of
orders, notices and other documents of legal nature, con-
template and provide for the practice of law by an un-
licensed person and, therefore, such contracts are il-
legal..
”
. -
Honorable D. Richard Voges, Page 9
Article 430a of the Penal Code of Texas, cited by you,
provides, in part, as follows:
“Art. 430a. Corporation or association practicing
law.
“Seetion 1. It shall be unlawful for any corpora-
tion or any person, firm, or association of persons,
excerltnatural persons who are members of the bar regu-
larly admitted and licensed, to practice law.
“Section 2. For the purpose of this Act, the prac-
tice of law is defined as follows: Whoever (a) In a :~
representative capacity appears as an advocate or draws ‘-
papers, pleadings, or documents, or performs any act in
connection with proceedings pending or prospective be-
fore a court or a justice of the peace, or a body, board,
committee, commission or officer constituted by law and
having authority to take evidence in or settle or deter-
mine controversies in the exercise of the judicial power
of the State or subdivision thereof; or, (b) For a con-
sideration, reward or pecuniary benefit, present or
anticipated, direct or indirect, advises or counsels
another as to secular law, or draws a paper, document or
insizument affecting or relating to secular rights; * * *.
” * w * .
“Section 6. Any person, firm.,corporation, or as-
sociation of persons violating any of the provisions of
this Act shall be guilty of a misdemeanor. If any pro-
visi~znof this Act is violated by any person individual-
ly or by any person or persons representing a corpora-
tion, or association, or by a corporation, the defendant
or defendants upon conviction shall be punished by a
fine of not more than Five Hundred ($500.00) Dollars nor
less than One Hundred ($100.00) Dollars.
“Section 7, Any agreement by any person, corpora-
~tion,or association in violation of this Act shall be
illegal * * * .‘I
We think the opinion of the Beaumont Court of Civil Appeals
in the case of Stewart Abstract Co,, et al v. Judicial COmIiSSiOII Of
Jefferson County, et al, also cited by you, is conclusive on the
Honorable D. Richard Voges, Page 10
question of whether an injunction will lie to restrain the illegal
practice of law. We quote from that opinion:
"The next question then is: Did the trial court
have :powerto enjoin the illegal practice of law. We
think unquestionably the courts do have such power.
McCloskey v. San Antonio Public Service Co., Tex. CiV.
APP., 51 S. W. (2d) 1088, writ refused. Unauthorized
prac,ticeof law constitutes a contempt of court. People
ex rel. Ill. Bar Assn. v. People's Stock Yards State
Bdnk, 344 111. 462, 176 N.E. 901; Clark v. Austin, 340
MO. 467, 101 S. W. (2d) 97-f. Injunction is a proper
remedy to prevent unlawful practice of law when asked
by attorneys acting for themselves and other affected
members of their profession. Fitchette v. Taylor, 191
Minn. 582, 254 N.W. 910, 94 A. L. R. 356, Supreme Court
of Minnesota. And a corporation may be restrained by
injunction from the performance of acts which constitute
the practice of law. Dworken v. Apartment House Owners
Assn, 38 Ohio ~pp. 265, 176 N.E. 577. The practice of
law vitally affects the public interest and the courts
have power to enjoin unlawful practice, or take such
other steps within their constitutional powers as may be
necessary to suppress such practice. Rzndall v. Brig-
ham, 7 Wall. 523, 19 L. Ed, 285; Fitchette v. Taylor,
191 Kinn. 582, 254 N.W. 910, 94 A. L. R. 356. See also,
annotation to latter case in 911A. L. R.,pages 359 et
seq.
"A corporation has a legal right to employ an at-
torney or maintain a legal department to handle its own
legal business, furnish it opinions, legal counsel or
advice for its own benefit in connection with the per-
formance of its lawful duties. We do not mean to hold
otherwise. But a corporation mcty not furnish legal
services to others and collect fees or profits therefor,
directly or indirect1 and it may be enjoined from do-
ing so. 2 Rawle C. L. 9t' 6; State ex rel. McICittrickV.
C. S. Dudley & Co., 340 MO. 852, 102 s. W. (2d) 895.”
You state that the "impression is left that the printing
house would furnish all the legal work for the sum of $30.00," AS-
suming that such is the nature of the contract made by the corpora-
tion, acti_ngthrough its soliciting agent, it is our opinion that it
is illegal, being in contravention of Section 7 of Article 430a of
.,e
Honorable D. Richard Voges, Page 11
the Penal Clode;that the responsible officers of the corporation and
its soliciting agent may be prosecuted under Section 6.of said arti-
cle; and that an injunction may be secured to prevent the corporation
and its agents from a violation of said article.
Yours very truly
ATTORNEY GENERAL OF TEXAS
BY
W. R. Allen
Assistant
WRA:RS
Approved: October 16, 1941
$ - Grover Sellers Approved: Opinion Commit&t
First Assistant Attorney General By: B. W. B., Chairman