State v. Retail Credit Men's Ass'n of Chattanooga

• Decision Date: 05 December 1931
• Citation: 43 S.W.2d 918,163 Tenn. 450
• Parties: STATE ex rel. v. RETAIL CREDIT MEN'S ASS'N OF CHATTANOOGA.
• Court: Tennessee Supreme Court

43 S.W.2d 918

163 Tenn. 450

STATE ex rel. v. RETAIL CREDIT MEN'S ASS'N OF CHATTANOOGA.

Supreme Court of Tennessee.

December 5, 1931

Appeal from Chancery Court, Hamilton County; W. B. Garvin Chancellor.

Suit by the State, on the relation of members of the Chattanooga Bar against the Retail Credit Men's Association of Chattanooga. A decree was rendered granting part of the relief prayed for, and the relators filed the record for writ of error in Court of Appeals which affirmed the decree, but relators later dismissed writ of error in Court of Appeals and filed the record for writ of error in Supreme Court, and defendant brought certiorari.

Decree modified, and, as modified, affirmed.

Moore & Moore and Frank Spurlock, all of Chattanooga, for complainant.

Strang & Fletcher and Sizer, Chambliss & Kefauver, all of Chattanooga, for defendant.

GREEN C.J.

This suit was brought in the name of the state upon the relation of several members of the Chattanooga Bar alleging that the defendant corporation, organized under chapter 58 of the Acts of 1901 as a commercial, mercantile, and protective agency, was illegally engaging in the practice of law. An injunction was sought against certain activities of defendant, and it was prayed that, on account of its unlawful practices, the corporation should be dissolved and its charter forfeited.

The defendant answered, setting out in detail its organization purposes, and method of conducting its business, and denying that it had exceeded its charter powers, or had been guilty of any misconduct, or that relators were entitled to any of the relief sought.

Proof was taken, and on the hearing the chancellor decreed an injunction against particular undertakings on the part of defendant, but declined to decree a forfeiture. The defendant prayed for and was allowed a special appeal to the Court of Appeals. The relators filed the record for writ of error in that court. The details of the chancellor's decree, including the nature of defendant's appeal, will be more fully set out hereafter.

The Court of Appeals affirmed the chancellor's decree after overruling a motion to transfer the cause to this court. Meanwhile the relators dismissed their writ of error in the Court of Appeals and filed the record for writ of error in this court. The defendant filed a petition for certiorari to review the action of the Court of Appeals, which writ we granted, and the whole case has been heard here.

We are of opinion that the Court of Appeals improperly refused to transfer the cause to this court. The suit was one in the nature of quo warranto under section 5165 et seq., Thompson's-Shannon's Code. Jurisdiction of an appeal in such a case is given to this court by chapter 100 of the Public Acts of 1925. As we have so often pointed out, under the act of 1925, it is the character of the case as presented to the lower court that determines the jurisdiction on appeal. Cox v. Smith, 154 Tenn. 369, 289 S.W. 524; Gormany v. Ryan, 154 Tenn. 432, 289 S.W. 497; Johnson v. Stuart, 155 Tenn. 618, 299 S.W. 779; Garrett v. Garrett, 156 Tenn. 253, 300 S.W. 9. Decisions defining the jurisdiction of the Court of Civil Appeals are not in point. Chapter 82 of the Acts of 1907, regulating appeals to that court, made the matter in question on appeal determinative of jurisdiction. Chapter 100 of the Public Acts of 1925, regulating appeals to the Court of Appeals, is altogether different.

The Court of Appeals being without jurisdiction herein, this court takes jurisdiction on petition for certiorari, because of the error of that court in failing to transfer. Campbell County v. Wright, 127 Tenn. 1, 151 S.W. 411. The case accordingly will be disposed of here as though directly appealed to this court, and proceedings in the Court of Appeals will not be further noticed.

Defendant corporation was chartered, as stated above, under chapter 58 of the Acts of 1901, which statute provides for "the organization of corporations for the purpose of conducting commercial, mercantile and protective agencies, for the purpose of collecting debts." The form of charter indicated by this act sets out that the purposes of such corporation are those "usual and appropriate to the business of commercial, mercantile and protective agencies."

The capital stock of the defendant was fixed at $10,000, divided into shares of $10 each; no member being allowed to own more than one share. The members are composed of merchants, bankers, and others, in the city of Chattanooga, and are required to pay annual dues. In consideration of the payment of such dues, the members are entitled to various services from the corporation, including copies of books showing the credit rating of those doing business in Chattanooga, a certain number of special reports as called for and other services not necessary to enumerate. No dividends have been declared by the corporation, but earnings in excess of the expense of operation have been used to add other lines of service for the benefit of the members. Defendant publishes a daily bulletin for the information of its members, in which is printed a list of all suits brought in the courts of Hamilton county, a list of deaths, marriage licenses, bankruptcy petitions, building permits, mortgages, etc. The membership of the association at the time of suit was about 235. The association renders services to its stockholders and members only, except that an arrangement is made with like agencies in other cities for reciprocal services between such agencies for the benefit of their respective members.

Some time after its organization, namely in July, 1928, a collection department was added to the business of the defendant. This is said to have been done at the request of a large number of the members because of dissatisfaction with the manner in which their collections had been previously handled by attorneys and others. Collections were undertaken by defendant under a uniform schedule of charges. Fifty per cent. on claims under $10; a minimum of $5 on claims of $10 to $20; 25 per cent. on claims of $20 to $200; and special arrangements for claims in excess of $200.

It is against the operation of the collection department, chiefly, that this suit is directed. It therefore seems proper to set out in substance the findings of the chancellor with respect to defendant's conduct of this branch of its business. Such findings, except as to certain deductions drawn by the chancellor, are not challenged.

The chancellor describes the character of letters which the defendant would write to those against whom it received claims for collection, and says that when these minatory letters failed to bring the alleged debtor to book, suit is instituted as a matter of course. To look after these suits, defendant employed a licensed attorney and paid him a fixed salary of $200 per month. When claims were in the form of notes providing for attorney's fees, the defendant collected and appropriated such fees to itself.

The defendant employed a deputy sheriff to devote his entire time to the service of process in suits brought upon claims placed in its hands for collection, and guaranteed the officer a stipulated monthly salary. The fees earned by the officer in the service of such process were appropriated by defendant to its own use, although the fees never amounted to as much as the guaranteed salary.

Defendant arranged with a justice of the peace to have all of its magistrate's suits brought before him. This justice of the peace kept a special docket on which he entered nothing but suits on defendant's claims. From July 28, 1928, to June 20, 1929, there were 1,200 such suits entered upon this docket, and from July 20, 1929, to May 20, 1930, there were 998 suits entered on this docket. All these suits were begun and prosecuted by the attorney employed by defendant.

Defendant made one change in its attorneys during this time. The present attorney stated that he had seven or eight suits on defendant's claims pending in the chancery court, and three or four such suits in the circuit court. When moneys were realized upon judgments, the defendant collected and receipted for the same, appropriated the officer's fees and any attorney's fees that were recovered, deducted its scheduled commission, and remitted the balance to the members.

The chancellor observed "that in all this the defendant was practicing law in the courts of the State is, I think, clear."

It further appears from the chancellor's findings that the defendant's employed attorney was called before the grievance committee of the local bar association with respect to the manner in which he was handling defendant's collection business. Thereupon certain changes were made in the method of doing business. Previously the attorney had his office in defendant's collecting department, and had entire charge of that department except the bookkeeping. After his interview with the committee of the bar association, the attorney took an adjoining office on the same hallway of the same building and a connecting door between the office he occupies and offices occupied by defendant's force is kept closed and locked. Defendant however, furnished the attorney with use of one of its stenographers, paid his telephone bill, paid his postage, and furnished him his letterheads. Previously defendant guaranteed the officer his salary. Thereafter the attorney guaranteed it. Instead of defendant collecting the officer's fees, the attorney allowed the officer to collect them himself, and he paid the officer the difference between the fees collected and an agreed salary. The salary of the officer was raised at about this time, and it was the general manager of defendant who dictated the raise. Prior to the...