Rich. Ass'n of Men v. Bar Ass'n

• Decision Date: 14 January 1937
• Citation: 167 Va. 327
• Parties: RICHMOND ASSOCIATION OF CREDIT MEN, INCORPORATED v. THE BAR ASSOCIATION OF THE CITY OF RICHMOND, ET ALS.
• Court: Virginia Supreme Court

Page 327

167 Va. 327

RICHMOND ASSOCIATION OF CREDIT MEN, INCORPORATED v. THE BAR ASSOCIATION OF THE CITY OF RICHMOND, ET ALS.

Supreme Court of Virginia, Richmond.

January 14, 1937.

Present, All the Justices.

1. ATTORNEY AND CLIENT — Nature of Right to Practice Law. — The right to practice law is in the nature of a franchise from the State, conferred only for merit.

2. ATTORNEY AND CLIENT — Right to Practice — Corporation. — The practice of law is not a lawful business for a corporation to engage in, since it cannot perform the conditions required by statute and the rules of the court.

3. ATTORNEY AND CLIENT — Nature of Relation — Cannot Exist between Attorney for Corporation and Client Thereof. — The relation of attorney and client is that of 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.

4. ATTORNEY AND CLIENT — Right to Practice — Corporation. — Independent of statute, it is contrary to public policy for a corporation to practice law, directly or indirectly.

5. ATTORNEY AND CLIENT — Admission — Police Power of State. — Limiting the members of the bar to those who possess the necessary moral and educational requirements is for the protection of the public and within the State's police power.

6. ATTORNEY AND CLIENT — Officer of Court — Power of Courts to Supervise Conduct. — Since an attorney is an officer of the court, the latter possesses the inherent power to supervise his conduct, both in and out of court, to the point of reprimanding or even removing him from office for misconduct.

7. ATTORNEY AND CLIENT — Inherent Power of Courts to Inquire into Illegal Practice — Necessity for Statutory Definition of Practice of Law. — The courts have the inherent power, apart from statute, to inquire into the conduct of any person — whether an individual, a lay agency, or a corporation — to determine whether he or it is illegally engaging in the practice of law, and to put an end to such unauthorized practice, so that it is unimportant that section 3422 of the Code of 1936, prohibiting the practice of law by an unlicensed person does not define "the practice of law."

8. ATTORNEY AND CLIENT — Unauthorized Practice of Law — Collection Agency Employing Lawyers to Collect Accounts for Creditors — Case at Bar. — In the instant case appellant solicited the business of collecting liquidated commercial accounts and when it needed the services of a lawyer selected him, made contact with him and employed him as agent for the creditor. Employment was by form letter in which the claim was sent to the attorney, the creditor not even knowing the attorney's name. Charges were fixed in advance; all correspondence passed from the lawyer to appellant, as did remittances; appellant had the right to discharge the lawyer or supervise his conduct, and the total compensation paid was shared by the lawyer and appellant.

Held: That while technically the relation of attorney and client was established between the lawyer and the creditor, appellant was the real client and its business was that of supplying for a consideration to others the legal services of lawyers, and was the practice of law by an unlicensed lay agency, contrary to public policy and statute.

9. ATTORNEY AND CLIENT — Officer of Court — Power of State Court to Inquire into Conduct in Federal Court. — Since an attorney is an officer of a State court, the latter has jurisdiction to inquire into his conduct in a Federal court itself, and disbar him for misconduct committed in that tribunal.

10. ATTORNEY AND CLIENT — Unauthorized Practice of Law — Jurisdiction of State Court to Ascertain Whether Domestic Corporation Engaged in Unauthorized Practice in Federal Courts — Case at Bar. — In the instant case the lower court decreed that appellant, a Virginia corporation which solicited the collection of commercial, liquidated accounts and engaged attorneys, when necessary, to collect claims in the name of the creditor, was engaged in the unauthorized practice of law, but refused to make any finding as to whether the collection of similar claims in bankruptcy, in the same manner, constituted the unauthorized practice of law, on the ground that since the Federal courts had exclusive jurisdiction over bankruptcy cases, any interference by a State court would amount to interference by one sovereign power with the functions of another sovereign power.

Held: That since appellant was a Virginia corporation, the State courts had jurisdiction and power to inquire into its actions and ascertain whether it was exceeding its corporate powers and engaging in the unauthorized practice of law.

Appeal from a decree of the Law and Equity Court of the city of Richmond, Part Two. Hon. Frank T. Sutton, Jr., judge rpesiding. Decree for complainants. Defendant appeals.

The opinion states the case.

Edwards & Davenport and Alexander H. Sands, for the appellant.

Ralph T. Catterall and Henry C. Riely, or the appellee.

Gregory, Stewart & Montgomery (New York City), William B. Layton (Portland, Ore.) and Alexander H. Sands (Richmond, Va.), for the National Association of Credit Men, amicus curiae.

EGGLESTON, J., delivered the opinion of the court.

This is a suit in equity wherein The Bar Association of the City of Richmond and others ask for a declaratory judgment, under chapter 254A of the Code of Virginia (section 614oa et seq.), that the Richmond Association of Credit Men, Inc. (hereinafter referred to as the credit association), is engaged in the unauthorized practice of law. From a decree holding that it is so engaged the credit association has taken this appeal.

The material agreed facts are as follows:

The Richmond Association of Credit Men, Inc., is a nonstock corporation organized under the laws of Virginia, with its principle office in the city of Richmond. Among its members are some of the leading business men and firms of that city. It is expressly stipulated that "None of them desires to violate the law and all wish a declaration from the court instructing them what the law is."

The credit association, as part of its business, regularly engages in the collection of commercial, liquidated accounts. These it solicits from both its members and others.

It first undertakes to collect the claim by its own efforts, either through personal calls of an agent or by letters sent to the debtor. In case the debtor pays the claim to the credit association, the latter deducts for its services a percentage of the amount collected and fixed at the rate adopted by the Commercial Law League of America.

There is no contention that such collections constitute the unauthorized practice of law, and hence we may dismiss without further consideration transactions of this character.

When the collection of a claim is first undertaken, it is "understood that if the association is unable to collect the claim without suit it is authorized by the creditor to employ an attorney at law for the creditor to collect the claim by bringing suit on it in the name of the creditor".

If the debtor fails to pay upon demand of the credit association, the latter so notifies the creditor and obtains from him express authority to select and employ a lawyer to collect the claim. The credit association then selects a lawyer for such purpose, and, without necessarily disclosing his name to the creditor, forwards to the lawyer the claim attached to the following form letter:

"RICHMOND ASSOCIATION OF CREDIT MEN, INC.

305 Travelers Building

Richmond, Virginia "Date "Amount "In Re: C-R-C Law List vs listing in The cause of your sent to you be- This claim is

"1. As agent for the creditor, we enclose the above claim for collection and remittance to our order, and you are to be governed by the following rates and conditions:

"RATES NET TO YOU — NO COLLECTION NO CHARGE

"9% on the first $500.00.

"6% on the next $500.00.

"3% on the excess of $1,000.00.

"4.50 on claims between $15.00 and $50.00.

"30% on claims of $15.00 and under.

"SUIT FEE: $7.50 unless otherwise arranged; on claims under $30.00 you shall first deduct your commission and then a fee for suit, but in no case shall your suit fee together with commission, plus our share of commission, exceed 50% of the amount collected.

"2. Retention of this claim will signify your acceptance of our terms. If these terms are not satisfactory; if claim is worthless; if you represent debtor, or for any reason you cannot attend to it, kindly return claim immediately.

"3. Fees and disbursements due on one claim cannot be deducted from another. Any fees or costs unpaid we will endeavor to collect for you, but under no circumstances are WE to be held personally responsible therefor.

"4. Incur no expense unless you have written authority. Unauthorized compromises will not be recognized.

"5. If suit is necessary and advisable, state what papers required and actual disbursements to be advanced, which must be accounted for in the final settlement of the case. If you recommend suit, advise us fully regardng debtor's financial condition, how soon judgment could be obtained, and the ultimate prospects of judgment being satisfied.

"6. Failure to acknowledge receipt of claim, answer letters or follow instructions will constitute a breach of this contract and give us the liberty to place duplicate claim with other representatives without NOTICE and without payment of commissions or other charges. IN THIS EVENT WE WILL REPORT ALL FACTS TO YOUR RECOMMENDER.

"7. Our bank does not charge exchange; therefore send us your checks. DEDUCTIONS FOR EXCHANGE WILL NOT BE ALLOWED.

"8. INTEREST MUST BE COLLECTED ON NOTES AND ON OPEN ACCOUNTS WHEN POSSIBLE."

The lawyer acknowledges receipt of, and agrees to handle the claim on prescribed terms and conditions by filling in and...