Untitled Texas Attorney General Opinion

. . .:
-I-
Hon. J. P. Bryan Opinion NO. O-831
County Attorney Re: Legality of “bond proceedings
Brazoria County contracW’ between county and a
Angleton,Texas~ party that has no license to prac-
tic,elaw.,
Dear Mr. Bryan:’ “’
This”is in reply to your letter of May 9,.1939, in
which you request the opinion of this department as to the le-
gality’of certain “bond proceedingscontracts”.whichare de-
scribed in your letter.
coin
your letter you make the following~statement:
“For a certain sum, say one per cent of the
amount of ,the-bondissue the bond broker will
enter into ,a contractwith Brazoria County to
work’~
out,~a schedule of the amount and type.of
bond to be sold for the particularproject sug-
gested, and then procure the services.ofan attor-
ney to prepare~the various orders, notices and
other instrumentsrequired to make up the trans-
cript of the bond proceeding,pay the costs of
the election,printing of the bonds and furnish
the’opinion of a recognized bond attorney. It
is conceivablethat the various orders to be
passed by the court, the notices, etc., which
make ,up.the,transcript could be prepared by a
person not an attorney; however, all proposals
that have been made to the Commissioners’Court
of this County have been that the brokerswill
furnish acceptableattorneys to prepare the
transcript of the proceedings. As I understand
it, perhaps more than half of the costs of pro-
ceedings contr&t will go to,pay ~sttorneys’ fees.!
You further state that the part.ieswho contractwith
the county~in the above described manner are not licen.sedto
practice law, but are individualswho are interested. in purchas-
ing konds.. you request our opinion as to whether or not such
contracts are illegal as constitutingcontracts providing for
unlawful practice of law by unlicensed persons.
Hon. J. P. Bryan, page 2 (0-831.)
It'being admitted that the persons who enter into
the proceedingscontracts described in your letter are not
licensed.topractice law, the first question to be determined
is whether or not the undertakingswhich such personshave
contracted to perform on behalf of the county of Brazoria
amount to llpracticeof law".
The "practiceof law", as generally understood,is
the doing or performing of services in a court of justice in
any matter depending therein throughoutits various stages and'
in conformitywith~the,adopted,rulesof procedure; but it is.
not confinsd to performing services inan action or proceeding
pendingincourts of justice ancl;.in,a larger sense,it' includes
legal advice and counsel and~the preparationof legal instru-
ments and contracts by which legal rights are secured although
such matters may or may not be pendingin snycourt.i 7 C.J.S.
?t1t.7g3'*,; ,z.
I' ..,,,.
",.'. .: .,
The.``r~ctice.,of:latr'has'also
beenIdefinsd.as~ follows:
,L. ``'~::. :-
,~
"In litigated,mattersIt involves not only
~the"actual:representatlon.``f the clfent fn.,court,
but also services rendered in advising a client
as tohis ca.useofactlon or defense. ;'Theprac-
tice of.~l&iwal&b~ includes'the'~giving'of~:edvice
'or ::
rendering services requiring~.~the ruse'oflegalI 'L
'138Kan. 899,``page
skill or .knowledge.lj~, 907,.:28:,'
p.(2d>~765;-769.,;, ,.:,,,,f,~
1.
:' ~,,
u.
.. :,'..
The:foregoing definltions'or~ubsbstaritislly.similar
ones have':been,repeatedQapproved:by"theappellate courts of
numerous states..' ,.Some'of~:the
.decisionswhich have approved one
of the foregoing-definitions'of the,-practice.of,law or .substan-
tially similar onesi~are herewith cited: ',.'
In Re:,"'Opinion~ofthe Justice's(Mass~j"~194N.E. 313;
Rhode Island Bar Associationv. Automobil Service Association
(Rhode Island)"179~%Lr.139j Eley v..Miller,.'34,N.E. 836; Paul
v. Stanley (Washingten)12 Pai (2) 401% People:-v.People:sStock
Yards State'Bank (Illi) 176 N.E. 911; Crawford~v.McConnell
(Okla.)49 Pac. (2).!5.%;.Childs v. Smeltzer (Penn.:)
171 A. 883;
Cain v. MerchantsNat'1 Bank & Trust Co. of Far o (N.Dak.1 268
N.W. 719; Re: Eastern'Idaho TrustCo.~ (Idaho) 8 Pap. 157;
Fichette v. Taylor (Minn.)~2!%N,W. 910. '. ...
./ In'Texas by statute, Artihle'430aPenaZCode of Texas,
the practice'of'lawis prohibited by any corporation;:'per,son;
firm~'or~
association.ofpersonsexcept natural per~sons who.are':
members of the Bar regular1 admitted and licensed topractice
law. Section 2 of Article c3Ca
',provides
,. a.5follows: .~
...;
,.``c.',L'.,'
'.~
,.~
. l
Hon. J. P. Bryan, page 3 (0-831)
“For the purpose of this Act, the practice
of law is defined as follows: Whoever (a) In a
representativecapacity appears as an advocate or
draws papers pleadings,or documents, or per-
forms any ac4 in connectionwith proceedings
pending or prospectivebefore a court or a jus-
tice of the peace, or a body board, committee,
commissionor officer consticuted by law and
having authority to take evidence in or settle
or determine controversiesin the exercise of
the judicialpower of the State or subdivision
thereof; or, (b) For a consideration,reward or
pecuniary benefit, present or anticipated,, direct,
or indirect, advises or counsels another as to
secular law or draws a paper, document or Instru-
ment effecting or relating,tosecular rights; or,
(c) For a consideration,:reward,, or pecuniary
benefit, present or anticipated,direct or lndi-
reat, dae~sany act in a representativecapacity
in behalf of another tending to obtain or,secure
for such other.;the. preventionor.ths redress of
a wrong or the enforcementor establishmentof a
right; or (d) For a consideration,direct orin-
direct, gives an opinion as to the validity~of
the title to real or personal property, or (3) As
a vocation, enforces settles adjusts
or compromisesdefauit``c%%&overted``or disputed
accounts, claims or dsm&ds between persons with
neither of whom he is in privity or in the rela-
tion of employer ,sndemployee in ths ordinary
Sensej is ‘practicinglaw. ,. lIt
We believe it ~requiresno extended ar,gumentto e&b-
lish that the preparation of orders, notices and other instru-
ments which are necessary to giv,evalidity to an election to
authorize the issuance of bonds are matters,whichrequire legal
skill and learning on the part of the person undertaking to pre-
pare such instruments. The various constitutionaland statutory
provisionswith respect to the proceedingsnecessary. to a valid
issuance of bonds must be strictly complied with,;and it is ‘a
matter of common knowledge in the legal profession that the field
of bond law is a specializedand technical one which requires ex-
perience and study by a trained mind as a prerequisiteto the
practice of such branoh of the law. It seems plain to us that a
person who unde,rtakes to supervise all of the,necessary steps
leading up to :a bond election and the issuance of bonds thereun-
der, inaluding the preparationof necessary orders notices and
other instrumentsand the furnishing of ~alegal oplnion upon the
validity of ‘a‘bondissue is unmistakablyundertaking to~praotice
law.
Hon. J. P. Bryan, ‘page4 (o-831)b
You are, therefore,advised that, in our opinion,
the contractsdescr1bed.i.n your .letter.
insofar as isuchcon-
tracts provide for the preparationof orders, notices,’ or
other legal .documents and”the’furnishing .of~a legal o-pinion
upon the validity of {he bond issue constitutecontractsto
practice law. If such~contractsare entered into by persons
who are not ~licensedto pr.acticelaw ..inthis State, the ‘same
are illegal, for the reason thatthe subject matter of snd
the considerationagreed t,o\bepaid by the .bondbroker for
such contracts constitute.illegaltransactions,-‘prohibited
as well by the common law as the statutorylaw of this State.
We ‘reach.thisresult whether we accept as ,thecon-
trolling definition.ofthe practice of law.that definition
set forth’in’Section2~of Artiole 430a,:Texas.PenalCode, or,
independentlyof the‘-statute;,,the~,‘.definitions
which have been
announced and ap~proved.by‘Oariousappellate courts.throughout
the Unitedestates.. We-believe.that.no;serious.contenti,oncan
be made to the effect that:.subdivisions(b)‘~and(c) of-Section
2 of Article 430a; Per@. Code‘,of.
‘Texas;are~,.not
vi,olated
,by
the undertakingscontained‘inthe.:-contractsde’scri.bedin your
letter insofar as ~:such
contracts provide.‘forEthel
drawing of
orders, notice8 and ‘other;legalinstrumentsand,the furnishing
of legal opinions:uponthe validity ,o$the bond’issuel‘:
.Themost recent‘discussion,,bya-Texas Appellate
Court of-aquesti.onanalagous‘to.theone:presented:inyour
opinion request ‘1,sfound in Montgomery v. Utilities’Insurance
co., 117 S.W.(2).‘486by the Beaumont Court of Civil Appeals.
This case 1s~’Howepen2t
ing for,decision i.nthe gupreme 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 policysnd to defend
its assured free of cast in any a&ion brotightto recover a,
.losscovered by the policy,.subsequentlyentered into an in-
-‘~dependentagreementwith the -assuredwhereby the insurance
.‘~
company agreed to defend any suit brought:against,its~ assured.
as a result of a certaincollision. Such independent. agree-~
ment was termed,.a‘1non-waiver18agreement,and it further pro-
videa that the insurancescompany should negotiate a’settlement
of the claim against its assured, and failing in such ~endeavor,
that ‘the insurance company would ‘selectand employ lawyers of.
its own choice to defend the case. However, the insurance ”
company did not agree or .bind-itself.tompay any judgment or
court‘costsresultingfrom said suit. Attorneys selected.and.
employed by the insurancecompany subsequehtlydefendant a suit
brought against the assured, and in such suit judgmentwas ren-
dered against the assured.‘:~The owner of such judgment,then,
instituted suit thereon against the.insurance company. In hold-
ing that the non-waiver agreementwas illegal and invalid, the
Court said:
Hon. J. P. Bryan, page ,s (0-831)
“That agreement,by its terms and by the
constructionplaced upon,it by the insurance
company itself in its pleadings in the present
suit, was a contract to practice law. It was
thereforein violation of the penal statutes
of this state which mak it unlawful ‘for any
corporationor any person firm, .oras,sociati~on
of persons, except natura! persons who are mem-
bers of the bar regularly admitted and licensed,
to practice law. Act 43rd Leg. p. 835 Ch. 238,
Vernon’s Ann. Penal ,Code Art. 430a. hing in
contraventionof the statute the agreementwas
lllegsl and of no effeat:”
,m*** A aorporation:cannotpraatiae law,
and of aours it aannot lsgally contr,aat to do
State v. C. S. Dudley & Co.Inc. 340 Mom
@?? 102 S W .(~2d) 895. State ex rel. V. Retail
Cret3.tMen:s*Ass’n 16i.Tenn. 450 43 S.W.(2d)
918; Boykin vs. Bo&ns, $74 Ga. $11, 162 SJb
796; In re Co-operativeLaw Co. 198 N.Y. 479,
92 N. g. 15 32 z. R. A. N. .s.$j 1.39Bm, 8th
Bep. 839, 18 Ann. Gas. 879; Eley se Miller, 7
Ind.App. 99 34 N.8. 8365 RichmondAss'n ,of
Credit hen bc. v. Bar Ass’n, 167 Va.327 189
S.E. 153; .&ate ex rel. vi Merchants*Proiee-
tive Corporation 189 Calm.531, 209 Pa 3630 Ben-
nie ‘v.Triangle Ranch Co. 73 Cola. 586 216 P.
718; In re .Otterness 181 mm. 254 233 N.W. 33.8
~73 A.L.R. 133.9*Bla$ & White Opera&g Co. Inc.’
v. Grosbart,lb7 N.J.L. 63, 15;rA. 630.~
“*** And since a corporationcannot praa-
tice law directly.it cannot ‘da so lndi,re+y by
employing competent lawyers to practke for it.
That would be an evasion which the .lawwould not
tolerate. 2 A.C.L. 946. State v. C .S. Dudley &
Co., Inc. 34C'Mo. 852, 102 S.W.(2) 895. The in-
tervention of a aorporation as general employer of
the attorneybetween him and ‘theclient ~1sdeStrUC-
tive of the necessary and i~mportant relation of
trust and undivided loyalty which ~mustexist be-
tween attorney and client. ‘Dividedobligations
in trust relations are obnoxious to the law. and
i&,one more so than in that of attorne~yand ali-
. People v. People’s Trust Co., 180 A.D.
494, 167 N.Y.S. 767, 768."
The Montgomery case, supra, together with the deal,slons
here~inafter
cited effectivelydispose of eny aontentlo~n whiah
Hon. J. P. Bryan, page 6 (0-8j!l>,
might be made:%0 the ‘ef!ZeMs:that
the,Go&t&&t2 a.e’&i”ibed
in
your letter~.sPtiplyprovrde%‘tirthe!per``rrnapc``‘``.P~g``
. serv-
.,
ices by a licensed attor$ey;‘:
In the~.Montgomery*&se it.wassaid tha&~:sinee .a cor-
poration cannot,practice‘law,directly,.,(it.-danno42?;
do..soindirect-
ly by emplaying.%bmpetenttla\JyeSs:-t~..:praatl’ce
zfor“itt,..
~:Sim&srl.y,
with respe.ot
to, theeti’onMxt3~inquired abcut~by~,yau&iti,sour
opinion th&t:.inl’~isen~ed~bon~.broker, not.‘beingauthorizedto
practice law‘;dii%ctly;cannot-do’so Indirectly-byemployfng com-
petent lawyers to.furnish hia6’``ith:.k~gal.o~inions
and-legal in-
strumentswhich-the’broker, ti-.+xrn- transmj.ts::to.“the.
...i., county.
In the situationpresent.ed by your: ;etterino dontrsctualrela-
tlonshlp exists between the county and the licensed,attorney.
The county’s’aeaX$ngs’-‘&e’with;aboiid4M&er~ an&‘th” bond broker
ins turn empl&y&,i &~,att&@&.!.-:~&. p@iy$ty &f &@tk&t$ :Lnbp. r&a-
tlonship of.attorney and;.cl~ent~-8x9sts.betljeeii
?he,.~att,erney
am-
ployed by the?broker:and,j$he:?%iznty<
_. :#’
T@$: s&e r~c<..‘f$:‘$ee~&&e&Yn: &e;eci’&~hs,
of the
Appellate Coi$t’ts:
iniother,!
StatWs. ‘I.n(C&WTo$d.~;@Con@@1 .
(Okla.) 49 Pa~..:f2),:.55l,~;:‘a.
c.ontr.@was+heId @agal. ‘inwhich a
person not licei%& to:pro’ctl&’ Tay.tio’nt#@ted..wtith~
certain
OlclahomaCc&y teijc’p.ay$% to;dist’erm$ne..
the legality of taxes
assessad age&n& property,,.to’;flle’z
prot’esW%h&%o.f;1and If
neoessary,.,
eni&*, at,FernBy~s
,,tofile ,syits~,
;for\the
.,..,
“covery of
illegal tati8.p.
:
?&y ‘cqur*:-~:?i*ld:
: .\.
“Clearlywe ,,%h&&“:the.
&&&iCf ‘by’h&hi&&‘k’at&
undertook to perform a type of service which could
only be ‘perpormed
.by:orie’
who had~dePionstrat’``~‘~s
qualificationsby!:obtatning:a l$cens~.:t’o:’
pradtice
la&t: ”
.Ip‘~C&in
v; z~ertihhants~
,Nati’onal``Bank
& Trust:.
Company of
Fargo ,,(N.-
lRik.)``-26%,.N.h
719~i.in,‘whlch~
case the +ssWon’under
considerationtjas’the ?&all& of trsinsaotion~s ,fn’
:%hitih
a bank
and tru’st’~,.:i?ompany,-thrbugh~.iatt~m~y``’
&iqXloyedby’-‘iC”un3?srtook
to
prepare for a ‘co,nslderat+$ ‘de~e,ds;,:~mortgages,
trust agreements,
assignment’sand other,legal $nstruments. The’,‘cotxrth&L&~that
such transactionsconstitutedUIegal pract%ce’ ~ofthela~. With
respect i-dtha’bapk’s++nte,nt‘$on,‘-that such transactfonswere
performed’.by,
,legally.licenpe~d~attorneys,the Court::said:-:,
“Since It (the bank) has no right to praoti.ce:
law directly,,$t,cannot do so indirectly by em-
pl’oy,idg’
a l’i’censed;
attorney:
‘toIpraictiae~for:‘i%t,
as t&t- would:be ‘a mere evasion of then1aw.K .‘
Hon. J. .i).
Bryan,.page 7 (0+831).~-
:.,
In Bepew v. Wichita Associationof Credit Men (Kan-
sas), 49 Pac. (2) .1041,the Court said:
“One who confers with clients, advises
them as to their legal rights, and then takes
the business to an attorney and arranges with
him to look after it in court is engaged in
the practice of law.”
In Re CooperativeLaw Co.,(N.Y.) 92 N.E. 15, it was
held that since a corporation cannot practice law directly,
it cannot do so indirectlyby employing competentlawyers to
practice for it as that would be an evasion which the law
will not toleraie. To the same ,effectare: In re: Otterness
(Minn.) 232 N.W. 318, and People ex rel ‘LosAngeles Bar Asso~
elation v. Cal. Protective Corporation (Cal.) 244 P. 1089.
In the recent case of Rhode Island Bar Association
v. Automobile Service Association (Rhode Island), 179 Atl. l.jy,
an exhaustive and able discussion and review of the history of
the decisions and reasons for prohibitingthe practice of law
by unlicensed persons is found. In that 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 assoclatlonin cases involving violations of traffic
laws, and also agreed to furnish such counsel for the purpose
of prosecutingand defending, on the part of the member, cl:.%,?-~rr:
and suits for damages for and against the members. The CourL
after quoting the contract in detail says:
“Each of the severalnumbered paragraphs of the
respondent’s (A.S.A.)contract with its ,customers
calls for legal service of some kind except para-
graphs 3, 6 and 11. True, this legd service is to
be rendered hot by them personally,but by counsel
designatedby them. Ostensibly such service is freo,
but actually it Is by far the major part of the con-
siderationwhich the customer receives for his mem-
bership fee. Out of eleven paragraphs,only three
are not of a legal nature,and‘twoof those are so in-
consequentialas to be disregarded.
“These respondentsthen are engaged in selling
legal advice and assistance in associationwith a
duly licensed member of the bar of this court. Their
associationwith this member does not absolve them
from responsibility. We see no difference in their
case from that of the respondentIn Re Co-operative
Law Co. (1910) 198 N.Y. 479, 92 N.E. 15, 16, 32 L.R.A.
:.
.-f.r4
Hon. J. P. Bryan, page a w-831)
LN.3.) 55, 13,9Am.St.Bep. 839 19 Ann.Cas.
879, where the court says: !!!he ~,relatlonof
attorney and client is that of master and
servant in ~a limited ,anddignified senses,and
it involves the highest trust,“andconfidence.
It canti& be ‘delegatedwithout conse’nt,and
it cannot exiet betw.eenan attorney,‘employedby
a corporationto practice law for :it, and,,,,a.
client of the corporation,for he would be sub-
ject to ~thedirections of the:.corporation,,and
not ‘to~thedire’tit,ions
of the clierit.lf
In another,place in the opinion,-the Court says:
“‘Thus,indir&tly``throughthe’respond&i
Morri’s,“they have bee,nassuming to,conduct~,a, ~:,
law practice on a wholesale busin6ss.&ale
reaching.,
throughout, the state.. What these r,e-
~.$ondents,~cann0.t,legally:do‘.dJr,e&ly
~they;may
nc$ do :in&lrect:ly;The.ysaq’..they,havercon-,., ~:::, ,:.,-~
ducted ‘t.hisbusipe% for:tw~elve ~ye,@syithaut.: i 1., :,,,
interference: ThS$ my w'ellbe;.?I$ #:pe,qe LengJh .; ~.
Of’l;iqedoes ‘hot.aiidcan+ .~convert ,,into;
,alegal. I
act,what ,‘I
s ;illeg,al.”.
’ “” In ~Iview”
of..
the above cited &&ho&tie’s ‘andother,3
‘.t,oo
&me~rous”% ‘quotein ‘this.. opinion~,~,
,:we
‘a& donstrainedto
.holdthat the”contra6t.s .described:inyour letter;,:‘insofar
as
such contradts provide.for’~ the furni.shing.of,,legal
opinions
on bond issues and for ,th’e’pprep~ation of ‘orders,notices and
other.documents of.~alegal nature, contemplateand provide for
the ‘pract~ice ,oflaw by an %unlicenseg~‘person
and;~therefore,
such @itract s are‘illegal..
Yo6.s ‘very truly
NJ!TOE@Y.,GENERAL OF TEXAS
‘,
By /s/ Robert E. Kepke
Assistant
Robert,E. Kepke,,,
APP.RCVEBArJG25,: 1939 "~
/s/ Gerald C. Mann ,.::
ATTORNEY GENERAL OF TEXAS
:
APPROVED:OPINION ‘CG+TTEE
BY: ,?WE..
CHAIRMAN ~,
RM1l3T:wb
.,
,.