Bay County Bar Ass'n v. Finance System, Inc., 42

• Decision Date: 02 April 1956
• Docket Number: No. 42,42
• Citation: 345 Mich. 434,76 N.W.2d 23
• Parties: BAY COUNTY BAR ASSOCIATION, a voluntary association, Plaintiff and Appellant, v. FINANCE SYSTEM, Inc., a Michigan corporation, and Victor R. Benish, d/b/a Finance System of Bay City, Defendants and Appellees.
• Court: Michigan Supreme Court

Page 23

76 N.W.2d 23

345 Mich. 434

BAY COUNTY BAR ASSOCIATION, a voluntary association Plaintiff and Appellant, v. FINANCE SYSTEM, Inc., a Michigan corporation, and Victor R Benish, d/b/a Finance System of Bay City Defendants and Appellees.

No. 42.

Supreme Court of Michigan.

April 2, 1956.

F. Norman Higgs, Arthur J. Kinnane, Bay City, for appellant.

Gregory M. Pillon, Detroit, for appellees.

Edwin W. Koepke, Saginaw, for appellees.

Before the Entire Bench.

DETHMERS, Chief Justice.

Plaintiff sought to enjoin the unauthorized practice of law by defendants. From decree granting only partial relief it appeals.

The corporate defendant is in the business of collecting claims for others in Detroit. It has a 'system' and has issued a franchise to defendant Benish to use it in the operation of his collection agency in Bay City. Under the 'system' Benish solicits claims for collection, sends a number of collection letters and, if claims remain unpaid, solicits and takes assignments thereof from the creditors for the purpose of making further collection efforts, including bringing of suit. The corporate defendant follows a like practice in Detroit. Defendants make it a business, as such assignees, to bring suits in their own names on the assigned claims. Defendant corporation accepted, allegedly as an accommodation to Benish, assignments procured by the latter of 25 Bay City accounts and, as party plaintiff, brought suit on 23 of them in the Bay City municipal court.

The corporate defendant has been represented in court in such suits by an attorney. Benish, except for one suit in which he was represented by an attorney, either represented himself or was represented in the cases by a lay employee. Defendants pay nothing to the creditors for the assignments, but claim to have the legal title to the assigned claims. They state, in effect, in their answers, and one of their attorneys testified that 'the client or patron (assignor) of the agency has an equitable interest in a claim after assignment because * * * if Finance System, Inc. does collect the assignors are entitled to a percentage * * * if the creditor wants * * * further collection efforts * * * the Finance System policy is to have him execute an assignment * * * The purpose of the assignment is to transfer the ownership to Finance System, Inc., and the reason is primarily that it gives them the claim to do with as they want'. The account is assigned only for purpose of collection. Defendant Benish tells creditors that his agency has a legal department which he will use, if necessary, to collect the account and mention of its legal department is made in notices to debtors.

The trial court dismissed as to corporate defendant on the ground that it does not operate in Bay County, enjoined any nonlawyer employee of Benish from practicing law or appearing in any court in a representative capacity and Benish from permitting any such employee from doing so, and denied all other relief prayed against Benish on the ground that his course of conduct, as above outlined, does not constitute the unauthorized practice of law.

Defendants rely on our holding in Kearns v. Michigan Iron & Coke Co., 340 Mich. 577, 66 N.W.2d 230, 233, that an assignee is the "real party in interest" within the meaning of C.L.1948, § 612.2, Stat.Ann. § 27.654, and thus entitled to sue in his own name, even though the assignment was clearly made for the sole purpose of enabling the assignee to collect the claim for the benefit of the assignors. In this connection defendants also cite Nierman v. White's Motor Parts, Inc., 269 Mich. 608, 257 N.W. 751, and Continental National Bank v. Gustin, 297 Mich. 134, 297 N.W. 214. For the further proposition that a defendant in such suit cannot raise a question as to the consideration for the assignment they cite Adair v. Adair, 5 Mich. 204; Coe v. Hinkley, 109 Mich. 608, 67 N.W. 915; Ellis v. Secor, 31 Mich. 185; Briscoe v. Eckley, 35 Mich. 112; Barlow v. Lincoln-Williams Twist Drill Co., 186 Mich. 46, 152 N.W. 1034. On the general subject of the right of an assignee to sue in his own name, regardless of consideration for the assignment, they also cite Henderson v. Detroit & M. R. Co., 131 Mich. 438, 91 N.W. 630; Grand Rapids Milk Producers' Ass'n v. McGavin, 295 Mich. 477, 295 N.W. 232; National Adjusting Ass'n v. Dallavo, 253 Mich. 239, 234 N.W. 485; Herbstreit v. Beckwith, 35 Mich. 93. On the basis of the above, defendants reason that if they, as assignees, are the real parties in interest and may sue in their own names in one case, they may do so in any number of cases and that, therefore, it follows that in so doing they are not engaged in the unauthorized practice of law. In Kearns v. Michigan Iron & Coke Co., supra, a controlling question was whether plaintiff, as assignee, was the real party in interest within the meaning of the cited statute entitling him to sue as party plaintiff. We quoted therein from Poy v. Allan, 247 Mich. 385, 225 N.W. 532, to the effect that the real party in interest statute was enacted to protect a defendant from being harassed repeatedly by a multiplicity of suits for the same cause of action, but that when a defendant's rights are fully protected in the litigation and judgment against him therein will stand as a conclusive adjudication of the rights in controversy and a bar to any further suit by another party, the purpose of the statute has been served. We held, accordingly, that because the plaintiff in Kearns had an assignment such that satisfaction of a judgment obtained thereon by him would discharge the defendant from his obligation to the assignor, plaintiff was the real party in interest within the meaning and for the purpose of the statute and, hence, could maintain his suit against any objection by defendant on that score. To hold, however, that a plaintiff meets the test of the real party in interest statute is a far cry from holding that, in bringing such suit, he is not engaging in the unauthorized practice of law in violation of C.L.1948, §§ 601.61, 450.681, Stat.Ann. §§ 27.81, 21.311.

Defendant cite three cases from other jurisdictions to support their contention that the practice in which they are engaged does not amount to the practice of law. Cohn v. Thompson, 128 Cal.App.Supp. 783, 16 P.2d 364; Clark v. Andrews, 109 Cal.App.2d 193, 240 P.2d 330; Washington State Bar Ass'n v. Merchants, etc., Co., 183 Wash. 611, 49 P.2d 26. Cohn, in which the decision is not that of a court of last resort, on first impression appears to lend support to defendants' position, but, as the Tennessee court observed in State v. James Sanford Agency, 167 Tenn. 339, 69 S.W.2d 895, 898, the decision in Cohn 'was expressly grounded upon a statute of the state of California recognizing the right of a collection agency to carry on its business by 'obtaining in any manner the payment of a claim.' This statutory provision, the court ruled, 'is broad enough to include bringing a suit.' We have no such statute, * * *.' Clark is not authority for defendants' position and, interesting to note, holds that one who assigns a claim for collection thereby makes the collection agency his agent for the purpose of collection so that he is liable for the consequences of a wrongful attachment by such agent. Decision in the Washington Bar Association Case supports defendants, but rests on a narrow construction of a statute not in effect in Michigan.

Plaintiff, in turn, relies on Nelson v. Smith, 107 Utah 382, 154 P.2d 634, 157 A.L.R. 512; Bump v. Barnett, 235 Iowa 308, 16 N.W.2d 579; State v. James Sanford Agency, supra; and State ex rel. Freebourn v. Merchants' Credit Service, Inc., 104 Mont. 76, 66 P.2d 337. The Utah statute under consideration in the Nelson case, after prohibiting the practice of law by persons who are not duly licensed attorneys, provided:

"Nothing in this section shall prohibit one unlicensed as an attorney from personally representing his own interest in a cause to which he is a party in his own right and not as assignee; * * *." [107 Utah 382, 154 P.2d 636]

Taking note of a provision of the Utah Constitution, art. 1, § 11, that:

'* * * no person shall be barred from prosecuting or defending before any tribunal in this State, by himself or counsel, any civil cause to which he is a party.'

the court held that if the quoted statutory language must be read to prohibit an assignee who is not an attorney from representing himself in court in a suit on the assigned claim, such statutory prohibition would be unconstitutional under the above quoted provision of the Constitution and must be 'spelled out of the language' of the act because, as that court went on to say, 'In numerous cases we have held that an assignee is a real party in interest even though the assignment be only for the purpose of suit.' (Citing cases.) The parallel between the pertinent legal rights and status of assignees in Utah and in Michigan is therefore manifest. In an exceedingly well-reasoned opinion the Utah court held that despite the fact that an assignee for collection purposes only is a real party in interest and thus entitled to sue on the assigned claim and to represent himself in the case, nevertheless, such assignment may not be employed to accomplish the unlawful purpose, as that court phrased it, of evading or circumventing the statutory prohibition against the unauthorized practice of law. In recognizing that an assignee for purposes of collection of a claim in which the assignor retains a beneficial interest may bring suit thereon in individual cases the court pointed out that such holding is not determinative of the question of whether the assignee, in so doing, is engaging in the practice of law. We quote with approval from that court's opinion the following:

'The defendants take the position that the constitutional provision, Art. I, Sec. 11, discussed above gives them the right to proceed as assignees to do the...