State ex Inf. McKittrick v. Dudley & Co.
| Decision Date | 24 March 1937 |
| Docket Number | No. 34682.,34682. |
| Court | Missouri Supreme Court |
| Parties | STATE OF MISSOURI upon the information of Roy McKITTRICK, Attorney General, Relator, v. C.S. DUDLEY & COMPANY, INC., a Corporation. |
Roy McKittrick. Attorney General, and Franklin E. Reagan, Assistant Attorney General, for relator; Paul M. Peterson of counsel.
(1) Section 11692, Revised Statutes 1929, clearly includes within its definition of "law business," the collection of commercial claims by a lay agent where the collection involves the placing of the claims in the hands of attorneys. (2) Sections 11692 and 11693, Revised Statutes 1929, are advisory only, and will not be recognized by the court if the definition of "law business" or "practice of law," as defined therein, does not meet with the approval of this court.
Polk & Williams for respondent.
(1) Sections 11692 and 11693, and particularly the last clause of Section 11692 (R.S. 1929), are unconstitutional and void, and must be laid aside, as being contrary to the due process guaranteed by the Fourteenth Amendment to the Federal Constitution, and as depriving, contrary to said Constitution and the amendments thereto, the respondent of the equal protection of the laws. Allgeyer v. Louisiana, 165 U.S. 590; Smith v. Texas, 233 U.S. 630; People v. King, 197 N.Y. 143, 27 L.R.A. (N.S.) 528; Schnaier v. Navarre Hotel Co., 182 N.Y. 83, 70 L.R.A. 722; Liggett v. Baldridge, 278 U.S. 105; First Natl. Bank v. Shallenberger, 172 Fed. 1001. (2) So far as applied to this record, the other clauses of said sections are not apposite; but if so, are subject to the same vice and invalidity. (3) The collection or attempted collection of accounts is not the practice of law; and there can exist no rule against solicitation of work and labor. Neander v. Tillman, 232 App. Div. 189; In re Associated Lawyers Co., 134 App. Div. 350; Public Traffic Serv. Bureau v. Haworth Marble Co., 178 N.E. 703; Kendrick v. State, 120 So. 142; State v. James Sanford Agency, 69 S.W. (2d) 895. (4) The real question is as to whether the law of agency is applicable to the employment of an attorney. We submit that it is; and cannot be denied, without wiping out a vast and long-recognized body of law. 1 Thornton on Attorneys at Law, sec. 136. p. 324; Weeks on Attorneys at Law, sec. 189; 2 R.C.L., sec. 37, p. 955; 2 Clark & Skyles on Agency, sec. 631, p. 1370; Strong v. West, 110 Ga. 382; Porter v. Peckham, 44 Cal. 204; State ex rel. v. Retail Credit Men, 43 S.W. (2d) 922; Fowler v. Iowa Land Co., 99 N.W. 1097; Swartz v. Morgan, 29 Atl. 974; Ryan v. Tudor, 31 Kan. 368; Mason v. Taylor, 35 N.W. 474; N.Y. Life Ins. Co. v. Smith, 147 S.E. 126; Griffith v. Rosenberg, 8 Pac. (2d) 284; Commercial Bank v. Martin, 1 La. Ann. 344; Davis v. Matthews, 8 S.D. 300; Kocinski v. White, 286 Fed. 211; Miller v. Ballerino, 67 Pac. 1047; Tabet v. Powell, 78 S.W. 996; Poucher v. Blanchard, 86 N.Y. 256; Phelan v. Stockyards Bank, 32 Pac. (2d) 270; Witham v. Hilton, 78 Wash. 446; Egan v. De Tonge, 133 N.Y. Supp. 737; Simon v. Sheridan, 47 N.Y. Supp. 647; Davis v. Waterman, 10 Vt. 526; Eoff v. Irvine, 108 Mo. 378; Stiles v. Cooter Gin Co., 74 S.W. (2d) 1092. (5) The authority existed to employ counsel as the agent of the customer. Stiles v. Cooter Gin Co., 74 S.W. (2d) 1092; Hoffman v. Natl. Bank, 211 Mo. App. 643; Guelich v. Natl. State Bank, 56 Iowa, 434; Beach v. Moser, 4 Kan. App. 66; 1 Restatement of Agency, sec. 155, p. 386; 1 Mechem on Agency (2 Ed.), sec. 1595, p. 1023; Herold v. Pioneer Trust Co., 242 S.W. 124; Wright v. Baldwin, 51 Mo. 269; Gestring v. Fisher, 46 Mo. App. 603; 1 Clark & Skyles on Agency, sec. 276 (c), p. 647. (6) To prohibit the practices of respondent in forwarding claims and in collecting interstate accounts, is to invade the realm of interstate commerce, which is reserved for Federal regulation. The master was in error in trying to rule this out of the agreed statement.
Denton Dunn and Joseph S. Lafferty, amici curiae for Lawyers' Association of Kansas City.
Carl H. Langknecht, amicus curiae for Kansas City Bar Association.
Edwin A. Krauthoff, amicus curiae for Credit Clearing House Adjustment Corporation.
John K. Lord, Jr., Irvin H. Gamble, Francis L. Kane and John C. Robertson, amici curiae.
Glen C. Weatherby, Verne D. Edwards and John Kramer, amici curiae.
Hyman G. Stein, Conway Elder, G.T. Priest, George E. Mix, Ernest F. Oakley and Courtney S. Goodman for unauthorized practice of law, appointed by the Lawyers' Association of Eighth Judicial Circuit.
Brown Shoe Company, Johnson-Stephens & Shinkle Company and Anheuser-Busch, Incorporated, amici curiae.
Amici curiae respectfully submit that they should have the right to refer commercial accounts to collection agencies with authority to them to enforce payment by placing the account in the hands of a local attorney specializing in these claims without returning the claims to amici curiae.
The Attorney General of the State of Missouri, filed an original proceeding in this court in the nature of quo warranto against the respondent, C.S. Dudley & Company, Inc., a corporation, praying for the forfeiture of its corporate charter because it has been guilty of usurping privileges, franchises, rights and authorities not granted by the State of Missouri, in that the respondent is wrongfully and illegally engaged in the "practice of law" and conducting "a law business."
Upon motion of the relator this court appointed the Honorable Du Val Smith, of St. Joseph, Missouri, a special commissioner in this cause to take the testimony and report his findings of fact and conclusion of law to this court. The cause was tried before the commissioner upon an agreed statement of facts. In his findings and recommendation, the commissioner reported to this court that he found the respondent had usurped rights and privileges not conferred upon it or warranted by law, in that it had unlawfully engaged in "law business" and "the practice of law." The commissioner recommended that the respondent be fined $1 and be taxed with the cost of this proceeding, and that it be admonished to desist and refrain from its illegal practice upon penalty of forfeiture of its charter and franchise. It is chartered "to do a general collection and adjustment business." The respondent collects or attempts to collect liquidated commercial accounts for an agreed contingent compensation. It solicits such business by personal calls and by letters, and prior to October 23, 1935 (two days after the motion to show cause was issued), respondent represented to prospective customers that it was in a position to collect accounts through its agents and associated attorneys. If it was necessary to send the account to an attorney, the respondent selected him and made arrangements for his fee and carried on all the correspondence between the attorney and the creditor. After October 23, 1935, if it became necessary to place the claim in the hands of an attorney, and the creditor did not choose to select one, the respondent was authorized to do so.
Prior to the filing of the suit, respondents told debtors who did not pay that suit would be instituted by its attorneys. After this suit was filed, respondent changed this practice, and now tells debtors who do not pay that the creditor will institute suit and respondent has since changed its by-laws so as to prohibit any employee from stating that the respondent can or many institute legal proceedings to enforce the collection.
The customary fee of the respondent was fifteen per cent of the amount collected on claims up to five hundred dollars, and where suit was instituted a seven dollar and fifty cent suit fee was usually paid by the creditor in addition to the contingent fee. The agreed statement of facts show that in 1933, where a claim was sent to an attorney for collection, the attorney received two-thirds of the fee and a suit fee of five dollars and the respondent received one-third of the contingent fee and an additional suit fee of two dollars and fifty cents. At that time, the respondent, in its letter to debtors threatened to resort "to measures that would affect your credit standing or embarrass you commercially" and the letter also stated that unless payment was made "we shall take steps to make the collection." If the account was not paid, respondent selected an attorney and sent the claim to him for collection.
The present method of the respondent in handling its business is as follows. (This method was adopted after the filing of this suit.) Claims sent to the respondent were collected on the following schedule of fees. Fifteen per cent on the first five five per cent on the excess of one thousand dollars; the minimum charge was seven dollars and fifty cents and items of fifteen dollars or less was fifty per cent.
It is stated in the letter of transmittal from the creditor to the respondent that respondent's services "shall not include legal work." However, if it is necessary for the claim to be placed in the hands of an attorney, the respondent sends the claim to the attorney; first asking the creditor to select one, and if the creditor does not do so, the respondent then selects an attorney. In sending the claim to the attorney, the letter states that the respondent is acting as agent for the creditor. The letter also, states what fee the attorney will receive. When a collection is made the attorney deducts sixty per cent of the fee, or nine per cent of the amount collected and remits the balance to the respondent who deducts six per cent of the amount collected and remits the rest to the creditor. The suit fee of seven dollars and fifty cents is divided so that the attorney gets five dollars and the respondent's share is two dollars and fifty cents. The attorney is...
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