People ex rel. Dunbar v. Schmitt, 16856

• Decision Date: 15 December 1952
• Docket Number: No. 16856,16856
• Parties: PEOPLE ex rel. DUNBAR, Atty. gen. v. SCHMITT.
• Court: Colorado Supreme Court

Page 915

251 P.2d 915

126 Colo. 546

PEOPLE ex rel. DUNBAR, Atty. gen. v. SCHMITT.

No. 16856.

Supreme Court of Colorado, en Banc.

Dec. 15, 1952.

Rehearing Denied Jan. 5, 1953.

Duke W. Dunbar, Atty. Gen., H. Lawrence Hinkley, Deputy Atty. Gen., Frank A. Wachob, Asst. Atty. Gen., William Rann Newcomb, Special Asst. Atty. Gen., and Philip A. Rouse, Special Asst. Atty. Gen., for petitioner.

McDougal, Klingsmith & Rogers, Denver, for respondent.

ALTER, Justice.

This is an original proceeding brought in the Supreme Court of Colorado by the Attorney General in his official capacity, charging the respondent Schmitt, individually and as manager, with a violation of the provisions of section 21, chapter 14, '35 C.S.A., relating to the unauthorized practice of law.

When the charges had been answered and the cause was at issue, it was referred to Hon. Haslett P. Burke as referee to hear and report thereon.

The referee's report contains the following, inter alia:

'It is charged that, not being authorized thereto, defendant 'has hereinafter held and now holds himself out as being ready, willing and able to pass upon the creation of trusts and trust documents and to create such trust or trusts or cause such trust or trusts to be created as would be legal in all respects and would save the trustor the necessity of making a will as well as the expense incident to the probating thereof, to relieve said trustor from transfer taxes as well as placing him in a more advantageous position in the distribution of profits to members of his family with a consequent reduction in the taxes which the said trustor would otherwise have to pay upon said income and otherwise holds himself ready, willing and able to practice law in the state of Colorado, all of which more fully appears from the printed pamphlets or brochures hereto (in this complaint) attached, marked Exhibits 'A', 'B' and 'C', respectively, and which by reference thereto herein are made a part of this petition.

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'It is admitted, or overwhelmingly established, that defendant has not been licensed to practice law in this state; that the National Pure Trust Service of Chicago (hereinafter referred to as the Pure Trust) is an organization engaged in Colorado in the business of preparing and establishing certain alleged trusts, and, as such, through defendant, has promoted some fifty of these. The legality of such trusts is not an issue in this proceeding, and the Pure Trust is not a party to any of these trust contracts and has no interest in the corpus thereof. Its sole interest is in the fees charged for the service rendered which are based upon a percentage of the value of the property involved. Defendant has been its sole representative in Colorado since January 1, 1949. As such he has been actively engaged in circulating large amounts of literature * * * containing advice relating to the advisability and legal consequences of the proposed organizations; the relation of partnerships, corporations and other trusts thereto; the advantages thereof, including the obviation of the necessity for the execution of wills; the administration of estates, the saving of taxes, personal liability to creditors, etc. The Pure Trust sells to its customers or clients certain copyrighted forms for the organization of such trusts as it has induced them to establish. It gives advice concerning the use of these forms and guides the trusts so established. It operated in this state through its so-called Rocky Mountain Division, of which defendant was advertised as 'Manager.' He insists he was but its agent or salesman, but on examination he finally and definitely asserted, 'I am the Pure Trust in Colorado.' All the evidence supports that statement. Hence it follows that whatever was done here by the Pure Trust was done by the defendant. The total fees collected from clients to which this scheme was sold run into thousands of dollars, and defendant's 'take' from thirty to fifty per cent thereof.

'The thing that stands out like a mountain peak in all this accumulated mass of evidence is that business men are not lured into disposing of all control over their property, of embarking into unheard of schemes to escape personal liability, taxes, court costs, attorneys' fees, etc., until they are assured by some reputed expert that the whole novel plan has been time-tested and found legally water tight. It cannot be doubted that the inducement for the so-called 'purchases' of this 'service' was legal advice, nothing else, and it makes no difference whether the Chicago concern was legitimate or otherwise, or whether its representations were true or false. It was practicing law in Colorado without authority, and defendant, who was reenforcing its claims and making representations on his own behalf and his own authority, was doing the same thing, both in direct violation of our statutes and in defiance and contempt of this court.

'Section 21, chapter 14, volume 2, 1935 C.S.A., makes it unlawful for any one not having a license from this court as such to 'hold himself out in any manner as an attorney.' Of course one may so hold himself out by writing, cards, signs, stationery, etc., but certainly may also, and perhaps even more effectively, hold himself out by his conduct. If he engages in the business of advising others on those important and complicated legal problems usually falling within the practice of the profession, pretending that he is qualified to do so, does it openly and constantly, year after year, by conversation and writing, and charges and collects substantial fees therefor, I can think of no way he could more effectively 'hold himself out' as having the knowledge and the necessary authority to so act. It must be borne in mind also that this legal information and advice was by no means limited to those propositions of law relating to the every day affairs of the average citizen or business man. It involved the most technical laws and rules, largely new and untried, through which only a learned and skillful lawyer would undertake to pilot a client.

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'In closing, i call attention to three original exhibits hereto attached which I consider vital, indisputable and controlling. These are People's Exhibits 'N', 'H' and 'S'.

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'Finally, I conclude that defendant is overwhelmingly proven to have been engaged in the practice of law over a considerable period of time, dealing with complicated legal problems, in an important field, involving the necessity for profound knowledge. He did this without license from this court and in contempt of its authority, and is hence subject to such discipline as this court, in its wisdom, may impose.'

Reference is made by the referee in his report to Exhibits N, H and S which are attached thereto.

It would unduly prolong this opinion to set forth these exhibits; however, in Exhibit N we find the following, written to a certified public accountant and bearing the signature of defendant:

'A Pure Trust Indenture Contract is a contract entered into between a Trust Creator and his selected Trustees, which constitutes a legal entity that can own property, transact business of any kind and nature as can an individual, through the written minutes its Trustees formulate and attach to the Indenture Contract and become a part thereof. The Trustees are the managers of the Trusts business and corpus.

'The Pure Trust Owns the Assets With Which It Deals, and is not an agency holding property for others. No Person has power over it; No One Possesses the Right to revoke it; No One Has a Reversionary Right to its assets. The Trust Indenture Contract is for 25 years.

'Beneficial Certificates It Issues, have no lien on the assets, and cannot, during the lifetime of the Trust, convey any interest in the Trust Corpus. Their possession and ownership award the holder a right to receive Trustees' profit distribution during the lifetime of the Trust, and Distribution of Corpus at the Termination Thereof. Beneficial Certificate holders Have No Voice in the Management of the Trust Affairs Whatsoever.

'If you search deeply into information available to you from a number of sources, you will find a good reason to want to change your attitude and your report to the Buckley Brothers. You...