Frazee v. Citizens Fidelity Bank & Trust Co.

• Decision Date: 26 June 1964
• Citation: 393 S.W.2d 778
• Court: United States State Supreme Court — District of Kentucky
• Parties: James H. FRAZEE, Individually, etc., et al., Appellants, v. CITIZENS FIDELITY BANK & TRUST COMPANY et al., Appellees.

Page 778

393 S.W.2d 778

James H. FRAZEE, Individually, etc., et al., Appellants, v. CITIZENS FIDELITY BANK & TRUST COMPANY et al., Appellees.

Court of Appeals of Kentucky.

June 26, 1964.

As Modified and Extended on Denial of Rehearing July 2, 1965.

As Modified Sept. 15, 1965.

Wilbur Fields, Louisville, for appellants.

Thomas W. Buillitt, Lee Curd Miller, Bullitt, Dawson & Tarrant, Louisville, for Citizens Fidelity Bank & Trust Co.

James W. Stites, Stites, Peabody & Helm, Louisville, for Kentucky Trust Co.

Squire Ogden, Ogden, Brown, Robertson & Marshall, Louisville, for Louisville Trust Co. and Lincoln Bank & Trust Co.

Ben F. Washer, Joseph J. Kaplan, Louisville, for Liberty Nat. Bank & Trust Co.

F. Trowbridge vom Baur, Washington, D. C., amicus curiae.

Bert T. Combs, Lexington, Robert E. Hatton, Louisville, amici curiae on petition for rehearing.

WILLIAMS, Judge.

This is a contempt proceeding seeking injunctive relief and penalties against five trust companies for the unauthorized practice of law in performance of their fiduciary services. As fiduciaries, the trust companies, through salaried lay and legal employees, appear in probate court, draft all necessary papers and make final settlements of a number of estates without other legal counsel. They solicit fiduciary business through the local news media and occasionally refer to the value of legal aid in drafting wills or in preparing an estate plan. Tax and estate publications are sent to many customers. Some of the materials focus upon the ability of the trust company to analyze, plan and suggest possible improvements in estates of prospective customers.

The circuit court held the activities of the trust companies, except for certain language in the advertisements related to planning of estates, were not condemned by Hobson v. Kentucky Trust Co. of Louisville, 303 Ky. 493, 197 S.W.2d 454 (1946). The Bar Associations appealed.

The appellants contend that the trust companies have been practicing law as prohibited by our opinion in Hobson v. Kentucky Trust Co. of Louisville, supra, and subsequent opinions of this Court. The trust companies rely upon Hobson as specifically permitting the activities complained about here. Moreover, it is argued, the legislature has provided that a fiduciary is not required to be represented by an attorney. KRS 395.145.

Practice of law is defined in RCA 3.020 as follows:

"The practice of law' is any service rendered involving legal knowledge or legal advice, whether of representation, counsel, advocacy in or out of court, rendered in respect to the rights, duties, obligations, liabilities, or business relations of one requiring the services. But nothing herein shall prevent any person not holding himself out as a practicing attorney from drawing any instrument to which he is a party without consideration unto himself therefor.'

The basic consideration in suits involving unauthorized practice of law is the public interest. Public interest dictates that the judiciary protect the public from the incompetent, the untrained, and the unscrupulous in the practice of law. Only persons who meet the educational and character requirements of this Court and who, by virtue of admission to the Bar, are officers of the Court and subject to discipline thereby, may practice law. The sole exception is the person acting in his own behalf.

Although an inferior court in the judicial system, the county court is no less subject to general control by this Court than other courts. Legal rights and obligations are as much at stake in county court as in other courts. Appellees' description of probate practice as merely filling out forms and adding figures belies the fact that what may appear simple to the untrained may be highly complex and determinative in its effect upon the legal rights or obligations of those involved. (Simplicity is not the test anyway; if it were, drafting of deeds, wills and trusts which appear simple would not be practice of law.) If any individual or corporation, not having a beneficial interest, were permitted to invoke jurisdiction of the probate court, the public could become prey to the solicitations of the untrained and unscrupulous, and the court would be without adequate or effective control of practice before it.

Since our opinion in the Hobson case, we have held that preparing and filing petitions for probate of wills, appointment of administrators and final settlement in county court, is unauthorized practice of law when done voluntarily by persons without a beneficial interest in the corpus of the estate. Carter v. Brien, Ky., 309 S.W.2d 748 (1956); Winkenhofer v. Chaney, Ky., 369 S.W.2d 113 (1963). Fiduciaries are in no different position, with respect to practice of law, from the defendants in the Brien and Chaney cases. The 'party' who is excepted from the definition of practice of law in RCA 3.020 is one who has a beneficial interest in the estate administered by the fiduciary.

Faced with our constitutional responsibilities and in view of the public interest, we conclude that invoking the jurisdiction of the county probate court through pleadings or appearances is the practice of law. Consequently, when probate or fiduciary documents are filed in the probate court or other court of record by a corporate fiduciary, they must be in the name and by the authority of a licensed attorney, except as otherwise herein provided. Of course, a corporation may not engage in the practice of law through salaried attorneys even as an incident to its commercial business. See Kentucky State Bar Ass'n v. First Fed. Savings & Loan Ass'n, Ky., 342 S.W.2d 397, 85 A.L.R.2d 178 (1961), and cases cited therein.

We are strengthened in our conclusion by many decisions from our sister states. For example, in Michigan, practice in county court on a probate matter is practice of law no less than in any other court. Grand Rapids Bar Ass'n v. Denkema, 290 Mich. 56, 287 N.W. 377 (1939). And in Minnesota, such practice, except by a person acting in his own behalf when he is a party thereto, must be done by a regularly licensed attorney. In re Otterness, 181 Minn. 254, 232 N.W. 318, 73 A.L.R. 1319 (1930). In Arkansas Bar Association v. Union National Bank of Little Rock, 224 Ark. 48, 273 S.W.2d 408 (1954), it was held that a bank appearing in court through its salaried attorneys in connection with the administration of estates and trusts in which it had been named fiduciary was engaged in the unauthorized practice of law. The Supreme Court of Arkansas said:

'* * * an individual or a corporation * * * is not looking after its own business when, acting as an administrator, an executor, guardian or in a similar fiduciary capacity, it undertakes to use the processes of the courts of this state in administrating and settling the affairs of its cestui que trust.'

Under Kentucky's form of government, the judiciary is a distinct department of governmental power (Kentucky Constitution, Sec. 27); this power may not be exercised by the other departments of government. Kentucky Constitution, Sec. 28. The Court of Appeals has been delegated the responsibility of general control of inferior jurisdictions. Kentucky Constitution, Sec. 110. The power to define the practice of law and supervise the judicial system rests in the judiciary. KRS 30.170. The Rules of the Court of Appeals supersede all laws in conflict therewith. KRS 30.170(2). Thus, insofar as KRS 395.145 provides that 'no fiduciary shall be required to be represented by an attorney,' it is ineffectual and superseded by the Rules of this Court.

This Court is no unaware of the uncertainty created by the Hobson, Brien and Chaney cases. Subject to various interpretations, the Hobson opinion was cited by both parties in support of their positions. In view of these circumstances, we are not constrained to assess a fine, but the appellees are permanently enjoined from practicing law as defined herein. The Hobson opinion is overruled to the extent that it may be inconsistent with our opinion in this case.

The trial court entered a declaration of rights with respect to advertising, wherein it was stated:

'It is specifically declared that the defendants do not have the right to advertise their services in such manner as to assert the claim that they or their officers are (independent of specific advice from (lawyers) authorized or permitted to plan, or make suggestions for the savings to be effected by the planning of, the legal aspects of estates of decedents or the settlors of voluntary trusts.'

This ruling is affirmed and the appellees permanently enjoined from any advertising inconsistent therewith.

This Court recognizes the administrative problem surrounding this controversy. State and national organizations, representative of the parties hereto, have likewise recognized these problems and have undertaken a solution calculated to be in the best interest of the public in general and their clients in particular.

The Standing Committee on Unauthorized Practice of the Law of the American Bar Association and the Executive Committee of the Trust Division of the American Bankers Association have adopted a Statement of Policies in a joint effort to establish the rights, duties, and obligations of both in their transactions and representations of the public. This opinion is extended to include the following declaration of policies contained in those agreements.

Trust institutions shall neither perform services which constitute the practice of law nor otherwise engage in such practice; therefore, they shall not draw wills or other legal documents or perform services in the administration of estates and trusts where such acts by law are considered the practice of law.

The development of trust business by a trust institution shall be on the basis of assistance to the customer in the use of the institution's trust services and facilities as related to his business or financial matters....