San Antonio Bar Ass'n v. Guardian Abstract & Title Co., No. A-5344

CourtSupreme Court of Texas
Writing for the CourtGARWOOD; GRIFFIN
Citation291 S.W.2d 697,156 Tex. 7
PartiesSAN ANTONIO BAR ASSOCIATION et al., Petitioners, v. GUARDIAN ABSTRACT & TITLE COMPANY et al., Respondents.
Decision Date18 April 1956
Docket NumberNo. A-5344

Page 697

291 S.W.2d 697
156 Tex. 7
SAN ANTONIO BAR ASSOCIATION et al., Petitioners,
v.
GUARDIAN ABSTRACT & TITLE COMPANY et al., Respondents.
No. A-5344.
Supreme Court of Texas.
April 18, 1956.
Rehearing Denied July 11, 1956.

[156 Tex. 8]

Page 698

Earl P. Hall and John R. Grace, Austin, Rawlings, Sayers, Scurlock & Eidson, Fort Worth, Frank M. Rosson, San Antonio, for petitioners.

L. M. Bickett, San Antonio, for respondents.

GARWOOD, Justice.

This suit was one for injunction by our petitioners, representing the organized legal profession of the state, to stop allegedly unauthorized or improper joint conduct of the three respondents-defendant related to the practice of law. These respondents-defendant are Guardian Abstract & Title Company, a private corporation doing a title insurance agency and abstract business in San Antonio, Texas, and two attorneys at law, John and Mary McQuown, who are husband and wife and form the law firm of McQuown and McQuown in San Antonio.

The McQuowns own sixty-seven percent of the stock of the corporate respondent (through a wholly owned corporation called the McQuown Mortgage Company) and comprise two-thirds of its board of three directors, Mary McQuown being its vice-president and a layman, C. G. Tierney, being the other stockholder and director as well as president and general manager, while the law firm is the 'general counsel'.

The firm has always rather confined its practice to real estate transactions and of late years has had little practice of any kind except services rendered to its mortgage company and the respondent abstract and title company, and except the below-described work for customers of the respondent company, which is the subject matter of this suit. The income from the latter, however, evidently compares favorably with, if it does not exceed, that for legal services rendered the corporate respondent and the mortgage company.

The legal work in question consists largely of the drawing of deeds, notes, mortgages and similar documents in the transactions of purchase and sale or mortgage of real estate between individuals, at least one of whom is insuring through the corporate respondent the title of the land being sold or the mortgage on the same land. The corporate respondent thus is not a party to these sale and mortgage transactions nor has any interest in or connection with them except that, as agent of the actual insurer it sells one or both of the individuals concerned title or mortgage insurance, for

Page 699

which, of course, it collects a premium, including, no doubt, an agency commission. Nevertheless the legal papers in question are prepared in the corporate office by McQuown and McQuown or purported lay agents of the latter (as hereinafter further explained) and the 'attorney fees' therefor are collected by the corporation, along with the [156 Tex. 10] insurance premiums, from the individuals concerned, the amounts of these fees being credited to McQuown and McQuown by the corporation, which, at the end of each month, pays the former an amount corresponding to the credits accumulated during that month.

While the annual volume of these fees remitted to McQuown and McQuown sometimes runs as high as about $20,000, and, as stated, is for services rendered to third parties, the annual amount of similar fees so collected and remitted to lawyers other than the McQuowns is relatively insignificant. In other words, whenever the corporate respondent is to sell the insurance on a particular title or mortgage, the McQuowns generally get the legal work in the third-party transaction which gives rise to the purchase of the insurance.

Actually this legal work is handled, in mass production style, by several so-called 'scriveners', using legal forms prepared originally by the McQuowns, which they are trained by the latter or by other scriveners to use. These girls are merely stenographers or typists, with salaries corresponding to such a status, receiving their salary checks from McQuown and McQuown, but working largely in the office of the corporate respondent, which immediately adjoins the law firm office, which latter is in turn also the office of the McQuown Mortgage Company. Moreover, there is no little evidence to indicate that these scriveners are about as much under the control of superior lay employees of the corporate respondent as they are under that of the law firm. Their work is not restricted to the legal work, but includes miscellaneous clerical or office work for the corporation. With their efforts and those of the transaction 'closers', who are lay employees of the corporate respondent and direct the 'scriveners' as to the papers to be prepared, an entire transaction is frequently concluded without the McQuowns themselves seeing either the papers or their third-party 'clients' who pay their fees. The same work has gone on even when the McQuowns were out of the city for an extended period. Indeed, in their testimony the McQuowns exhibited a rather extraordinary confusion in their own minds as to whether, for example, the purchaser of the land, for which the corporation was to issue title insurance, and the deed to whom was prepared for a fee as above described, was or was not their 'client' or 'represented by' them at all, even as they also appeared to be unconscious of any incongruity in the same lawyer acting in [156 Tex. 11] the same transaction both for the purchaser (who paid the corresponding fee) and the vendor (who paid the corresponding fee).

The origin of the legal work above described is evidently the title insurance business of the corporate respondent. The latter maintains contact with the insurance purchasing public more or less as would any commercial enterprise, making use of its acquaintances with the real estate fraternity, sometimes advertising in the newspapers and distributing or keeping available for real estate agents useful gifts with the corporate name on them, such as blotters and printed forms of sales contracts prepared by the McQuowns. In the normal case the real estate agent, who arranges a sale to a purchaser desiring title insurance and willing to insure through the corporate respondent, brings the signed sales contract to the office of the latter, and, without any question or discussion about who is to prepare the deed, note, mortgage or other legal papers, the machinery at the same office goes into operation and eventually, with or without some personal participation of Mr. or Mrs. McQuown, the entire matter is there completed, the purchaser of the land departing with his deed and title policy, the vendor with his cash payment and mortgage or mortgage and mortgage insurance, and the real estate agent with his commission. As before stated, the vast bulk of this legal work goes to the McQuowns

Page 700

alone, and relatively little to lawyers generally, although obviously the former are not the only lawyers in San Antonio with specialized knowledge pertaining to real estate transactions, and are probably less active than some others in such practice with the public generally.

As before indicated, the 'closing' is handled by the 'closers' of the corporate respondent, who handle the matter of adjustments for proration of taxes, deliver the deed or mortgage and the title or mortgage policy to the purchaser or mortgagee, and collect the premiums for the insurance and the fees for preparation of the legal instruments, crediting the fees to the McQuowns. In the usual case, the fee for preparation of the deed is paid by the vendor and that for the note and mortgage by the purchaser or mortgagor, all three documents being prepared by the same scrivener.

The...

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