OFFICE OF THE ATTORNEY GENERAL OF TEXAS ADSTIN

Gerald C. Mann Attorney General

Honorable D. RichardVoges CountyAttorney Wilson County Floresville, Texas

Dear Sir: OpinionNo. O-3984 Re: Can an injunctionbe secured to restrain a corporation from soliciting legal work for itself or for its attOPneys and from practicing law?

You have asked the opinion of this department on the abo’io and related questions contained in your letter of September 6, 19?~1, from which we quote:

“On the factsherein stated, and questions asked, will you please give me an opinion:

”‘AICompany, a corporation is engaged in the business of printing stationeryand selling office supplies, in connectionwith its printing business, its agents solicit the printing of Bonds and Warrants. A prospective customer is about to issuewarrants, and in determining the cost of the printing of suchwarrants, it is statedby the soli.ci.ting agent, that the co& of theprinting would be $34.00; and that the legal work couldbe done inAustin for $30.00; that the prospective customer could get the legal work done in Austin for the sum of $30.00; that this legal work would include all of the legalwork, but would not include a Bond Attorney’s Opinion. It is not statedwho the attorney is, nor is it stated that theprospective cus:omerwould have to see the attorney, or that the customerwould have tomake any arrangem,ents. In other words, the impression is left, that the printing house would furnish all the legalwork for the sum of $30.00.Honorable D. Richard Voges, Page 2

'Does this constitutepracticing law?

"Can the Corporation or its solicitingagent be proslecuted

under the existing law?

"Can an injunctionbe secured restraining such corporation from so soliciting legal work, for itself;
or for its attorneys, and from practicing such law?"

Your first question is answered in the affirmativeby our OpinionNo. O-831,written by Robert E. Repke, Assistant Attorney General, and addressed to Honorable J. P. Bryan, CountyAttorney of Brazoria County. Since that opiniondeals with a fact situation which is very similar to that outlinedby you (except for thebond attorney's opinion)we take the liberty of quoting from it at length:

"In your letter you make the following statement:

"For a certain sum, say one per cent of the amount of the bond issue, the bond broker will enter into a contractwith Brazorla County to work out a schedule of the amount and type of bond to be sold for the particularproject suggested, and thenprocure the services of an attorney to prepare thevarious orders, notices and other instrumentsrequired to make up the transcript of the bond proceeding,pay the costs of the election,printing of the bonds and furnish the opinion of a recognizedbond attorney. It is conceivable that the various orders tobe passed by the court, thenotices, etc.,which make up the transcript couldbe prepared by a person not an attorney; however, all proposals thathave been made to the Commissioners' Court of this County have been that the brokers will furnish acceptable attorneys toprepare the transcript of the proceedings. As I understand it, perhapsmore than half of the costs of proceedings contractwill go topay attorneys' fees.'

"You further state that theparties who contract with the county in the above describedmanner are not licensed to practice law, but are individualswho are interested in purchasing bonds. You request our opinion.

Honorable D. RichardVoges, Page 3

as towhether or not such contracts are illegal as constituting contractsproviding for unlawful practice of law by unlicensedpersons.

“Itbeing admitted that thepersons who enter into theproceedings contractsdescribed in your letter
are :notlicensed to practice law, the first question to be determined is whether or no,ttheundertakingswhich suchpersons have contracted toperform on behalf of the county of Brazoria amount to ‘practiceof law.’

“The ‘practiceof law,’ as generallyunderstood, is the doing or performing of services in a court of justice in any manner depending therein throughoutits various stages and in conformitywith the adopted rules of procedure;but it is not confined to performing services in an action or proceedingpending in courts of justiceand, in a larger sense, it includes legal advice and counsel and thepreparation of legal instrumentv and contractsby which legal rights are secured although suchmatters may or may not be pending in any court. 7 C. J. S. p. 703.

“Thepractice of law has also been defined as follows:

“‘In litigatedmatters it involvesnot only the actual representationof the client in court, but also services rendered in advising a clientas tohis cause of action or defense. The practice of law also includes the giving of advice or rendering services requiring theuse of legal skill or knowl.edge. 1 138 Han. 899, page 907, 28 P. (2d) 765, 769.

“The foregoing definitions or substantially similar oneshave been repeatedlyapprovedby the appellate courts of numerous states. Some of the decisionswhich have approved one of the foregoingdefinitions of the practice of law or substantially similar ones, are herewith cited:

“In Re: Opinion of the Justices (Mass.) 194 N. E., 313; Rhode Island Bar Association v. Automobile Service Association (Rhode Island) 179 Atl. 139; Eley v. Miller, 34 N. E. 836; Paul v. Stanley (Washington)12 Pa. (2d) 401; People v. Peoples StockYards State Bank (Ill.)Honorable D. Richard Voges, Page 4

1.76 N. E. 911; Crawfordv. McConnell (Okla.)49 Pac. (2d) 551; Childs v. Smeltzer (Penn.) 171Atl. 883; Cain v. Merchants Nat’3 Bank & Trust Co. of Fargo

I N. Dak.) 268 N. W. 719; Re: Eastern Idaho Trust Co. Idaho) 288 Pac. 157; Fitchette v. Taylor (Minn.) 254 N. W. 910.

“InTexas by statute,Article 43Oa, Penal Code of Texas, the practice of law is prohibitedby any corporation,person, firm or association of persons exceptnatural persons who are members of theBar regulal?ly

admitted and licensed topractice law. Section 2 of Article 430a provides as follows:

“‘For thepurpose of thisAct, the practice of law :Ls defined as follows: Whoever (a) In a representative capacityappears as an advocate or draws papers, pleadings, or documents, or performs any act in connectionwith proceedingspending or prospective befo:rea court or a justice of the peace, or a body, board, committee, commission or officer constitutedby law ,and

having authority to take evidence in or settle
or determine controversies in the exercise of the ‘udicialpowor of the State or subdivision thereof; or, i’ b) For a consideration,reward or pecuniarybenefit, present or anticipated,direct or indirect, advises or counsels another as to secular law, or draws ‘1 paper, document or instrument affecting or relating to secular rights; or, (c)For a consideration,reward, or pecuniary benefit, present or anticrpated,direct or indirect,does any act in a representative capacity in behalf of another tending to obtain or secure for such other theprevention or the redress of a wrong or the enforcement or establishment of a right; or (d)For a consideration,direct or indirect,gives an opinion as to the validity of the title to real or personalproperty, or (e)As a vocation, enforces, secures, settles, adjusts or compromisesdefaulted, controverted or disputed accounts, claims or demands between persons with neither of whom he is in privity or in the relation of employer and employee in the ordinary sense; is practici.ng

law.

. . .I

“We believe it requiresno extended argument to establish that thepreparation of orders,notices and. .

Honorable D. RichardVoges, Page 5

other instrumentswhich are necessary to give validity to an election to authorize the issuance of bonds
are matters which require legal skill and learing on thepart of theperson undertaking to prepare such instruments. The various constitutionaland statutory provisions with respect to theproceedingsnecessary to a valid issuance of bonds must be strictly complied with, and it is a matter of commonknowledge in the lega:. profession that the field of bond law is a specialized and technical one which requires experience and study by a trainedm,indas a prerequisite ,tothepractice of such branch of the law. It seemsplain to us that a person who undertakes to superviseall of the necessary steps leading up to a bond election and the issuance of bonds thereunder, including thepreparation of necessary orders,notices and other instrumentsand the furnishing of a legal opinion upon the validity of
a bond issue is unmistakablyundertaking topractice law.

“We reach this resultwhether we accept as the controllingdefinition of thepractice of law that definition set forth in Section 2 of Article 430a, Texas Penal Code, or, independentlyof the statute, the definitionswhich have been announced and approvedby various appellate courts throughout theUnited States. We believe that no serious contention can be made to the effect that subdivisions (b)and (c) of Section 2 of Article 43Oa, Penal Code of Texas, are not violated by the undertakings contained in the contractsdescribed in your letter insofar as such contractsprovide for the drawing of orders, notices and other legal instruments and the furnishing of legal opinionsupon the validity of the bond issue.

“Themost recent discussionby a Texas Appellate Court of a question analogous to the one presented in your opinion request is found in Montgomery v. Utilities Insurance Co., 117 S. W. (2d) 486, by the Beaumont Court of Civil Appeals. This case is now pending for decision in the Supreme Court of Texas. In the Montgomery case, an insurance companyhaving issued a liabilitypolicy in which it agreed to investigate all accidents and claims coveredby the policy and to defend its assured free of cost in any action brought to
reco~ver

a loss coveredby thepolicy, subsequentlyHonorable D. Richard :Voges,Page 6

entered into an independentagreementwith the assured whereby the insurance company agreed to defend any suit brought against its assured as a result of a certain collision. Such independentagreementwas termed a ‘non-waiver’agreement, and it furtherprovided that .the

insurance company shouldnegotiate a settlement of the claim against its assured, and failing in such endeavor, that the insurance companywould select and employ lawyers of its own choice to defend the case. However, the insurance companydid not agree or bind itself topay any judgment or court costs resulting from said suit. Attorneys selectedand employed by the insurance company subsequentlydefended a suit brought against the assured, and in such suit judgment
was rendered against the assured. The owner of such judgment then instituted suit ,thereon against the insurance company. In holding that thenon-waiver agreement was illegal and invalid, the Court said:

“‘That agreement,by its terms and by the constructionplaced upon it by the insurance company itself in its pleadings in thepresent suit,was a contract to pract:Lce

law. It was therefore in violation of the penal statutes of this statewhich make it unlawful “for any corporation or person, firm, or association of persons, except natural persons who are members of the bar regularly admitted and licensed, to practice law. Acts &3rd l$ssg,

p. 835, Ch. 238,Vernon’sAnn. Penal Code, Art.

. Being in contraventionof the statute the agreement was illegal and of no effect.”

“1 * * ** A corporation cannotpractice law, and of course it cannot legally contract to do so. State
v. C. s. Dudley & co. Inc. 340 MO. 852, 102 S. W. 8%; A2d) State ex rel. v. Retail CreditMen’s AssIn, 1 3 Tenn. 450, 43 S. W. (2d) 918; Boykin v. Hopkins, 174 Ga. 511, ~62 S. E. 796; In re Co-operativeLaw Co., 198 N. Y. 479, 92 N. E. 15, 32 L. R. A. N. S. 55, 139Am. St. Rep. 839, 19 Ann. Cas. 879; Eley v. Miller, 7 Ind. App. 529, 34 N. E. 836; RichmondAssn. of CreditMen, Inc. ‘7.

Bar Assn. 167 Va. 327, 189 S. E. 153; State ex rel v. Merchants’ Protective Corporation, 189 Cal. 531, 209 P. 363; Bennie v. Triagle Ranch Co. 73 Colo. 586, 216 P. 718; In re Otterness, 181 Mix-n.254, 232 N. W. 318, ‘73

A. L. R. 1319; Black & White Operating Co. Inc.
v. Grosbart, 107 N. J. L. 63, 151 A. 630.’-

Honorable D. RichardVoges, Page 7

"l* * ** And since a corporationcannotpractice law directly it cannot do so indirectlyby employing competent lawyers to practice for it. Thatwould be an evasion which the law would not tolerate. 2 R.C.L. 946; State v. C. s. Dudley & co. Inc. 340 MO. 852, 102 S. W. (2d) 895. The intervention of a corporationas general emplcyer of the attorneybetween him and the client is destructive of the necessary and importantrelation of trust and undivided loyaltywhich must exist between attorney and client. "Divided obli&ations in trust relatic'ns

are obnoxious to the law, and in none more SO than in that of attorney and client.' People v. Peoples Trust,Co., 180App. Div. 494, 167 N. Y. s. 767, 768.'

‘1* + *,”

"In the recent case of Rhode Island Bar Association

v. Automobile ServiceAssociation (Rhode Island), 179 Atl. 139, an exhaustive and able discussion and review of thehistory of the decisions and reasons for prohibiting t,he

practice of law by unlicensedpersons is found. In .tktat

case an automobile service association, for a stated annual fee, agreed to furnish legal counsel free of charge to represent and defendmembers of the association in cases involvingviolations of traffic laws, and also agreed to furnish such counsel for thepurpose of prosecuting and defending, on thepart of themember, claims and suits for damages for and against themembers. The Court after quoting the contract in detail says:

"'E~tch of the severalnumbered paragraphs of the respondent's (A.S.A.)contractwith its customers calls for legal service of some kind, except paragraphs 3, 6 and 1.1. True, this legal service is tobe renderednot by thempersonally,but by counsel designatedby them. Ostensibly such service is free,but actually it is by far themajor part of the considerationwhich the CUStomer receives for his membership fee. Out of eleven

(Note: In theMontgomery case, quoted from above, the decision of the Court of CivilAppeals has sincebeen reversedby the supreme Court (138 S. W. (2d) 1062), on the ground that the Insurance company was defending the suit toprotect its own interest, rather ,thanthat of the insured. But we think the authorities cited by the Court Of CivilAppeals in that case are applicable to the facts you give.-

Honorable D. RichardVoges, Page 8

paragraphs, only three are not of a legal nature, and two of those are so inconsequentialas to be disregarded.

“‘Theserespondents then are engaged in selli~ng legal advice and assistance in associationwith a’duly licenised

member of thebar of this court. Their associa~tion

with thismember does not absolve them from respo:asibility.We see no difference in their case from that of the respondent in Re Co-operativeLaw Co.

,I 1 1910 198 N. Y. 479, 92 N. E. 15, 16, 32 L. R. A. N.S. 55, 139 Am. St. Rep. 839, 19Ann. Cas. 879, where the court says: “The relation of attorney and client is th,st

ofmaster and servant in a limited and dignified sense, and it involves thehighest trust and confidence. It cannotbe delegatedwithout consent, and it cannot exist between an attorney employedby a corporation to practice law for it, and a client of the corporation, for he would be subject to the directions of the corporation, and not to the directions of the client.“’

“In anotherplace in the opinion, the Court says:

”’ Thus, indirectly through the respondentMorris, they have been assuming to conduct a law practice on a wholesale business scale reaching throughout the state. What these respondents cannot legally do directly they may not do indirectly. They say they have conducted this business for twelveyears without interference. This may well be, but mere length of time does not and cannot convert into a legal act what is illegal.’

“In view of the above cited authorities and others toonumerous to quote in this opinion,we are constrained to hold that the contractsdescribed in your letter, insofar as such contracts provide for the furnishing of legal opinions on bond issues and for the preparation of orders,notices and other documents of legal nature, contemplate and provide for thepractice of law by an unlicensedperson and, therefore, such contracts are illegal.. ”. -

Honorable D. RichardVoges, Page 9

Article 430a of the Penal Code of Texas, cited by you, provides, in part, as follows:

“Art. 430a. Corporation or associationpracticing law.

“Seetion 1. It shall be unlawful for any corporation or any person, firm, or association of persons, excerlt natural persons who are members of the bar regularly admitted and licensed, topractice law.

“Section 2. For thepurpose of thisAct, the practice of law is defined as follows: Whoever (a) In a :~ representative capacity appears as an advocate or draws ‘- papers, pleadings, or documents, or performs any act in connectionwith proceedingspending or prospectivebefore a court or a justice of thepeace, or a body, board, committee, commission or officer constitutedby law and having authority to take evidence in or settle or determine controversies in the exercise of the judicialpower of the State or subdivision thereof; or, (b) For a consideration,reward or pecuniary benefit,present or anticipated,direct or indirect, advises or counsels another as to secular law, or draws a paper, document or insizument affecting or relating to secular rights; * * *.

” * w *

.
“Section 6. Any person, firm.,corporation,or association of persons violating any of theprovisions of thisAct shallbe guilty of a misdemeanor. If any provisi~zn

of thisAct is violatedby any person individually or by any person or persons representing a corporation, or association, or by a corporation, the defendant
or defendantsupon conviction shallbe punished by a fine of not more than Five Hundred ($500.00)Dollars nor less than One Hundred ($100.00)Dollars.

“Section 7, Any agreementby any person, corpora- ~tion,or association in violation of this Act shallbe illegal * * * .‘I

We think the opinion of the Beaumont Court of Civil Appeals in the case of StewartAbstract Co,, et al v. Judicial COmIiSSiOII Of Jefferson County, et al, also cited by you, is conclusive on theHonorable D. RichardVoges, Page 10

question of whether an injunctionwill lie to restrain the illegal practice of law. We quote from that opinion:

"Thenext question then is: Did the trial court have :powerto enjoin the illegalpractice of law. We thinkunquestionably the courts do have suchpower. McCloskey v. San Antonio Public Service Co., Tex. CiV. APP., 51 S. W. (2d) 1088,writ refused. Unauthorized prac,ticeof law constitutesa contempt of court. People
ex rel. Ill. Bar Assn. v. People's StockYards State Bdnk, 344 111. 462, 176 N. E. 901; Clark v. Austin, 340 MO. 467, 101 S. W. (2d) 97-f. Injunction is a proper remedy toprevent unlawful practice of law when asked by attorneys acting for themselvesand other affected members of theirprofession. Fitchette v. Taylor, 191 Minn. 582, 254 N. W. 910, 94 A. L. R. 356, Supreme Court of Minnesota. And a corporationmay be restrainedby injunction from theperformance of actswhich constitute the practice of law. Dworken v. Apartment House Owners Assn, 38 Ohio ~pp. 265, 176 N. E. 577. The practice of law vitally affects the public interest and the courts have power to enjoin unlawful practice, or take such other steps within their constitutionalpowers asmay be necessary to suppress such practice. Rzndall v. Brigham, 7 Wall. 523, 19 L. Ed, 285; Fitchette v. Taylor, 191 Kinn. 582, 254 N. W. 910, 94 A. L. R. 356. See also, annotation to latter case in 911 A. L. R.,pages 359 et seq.

"A corporationhas a legal right to employ an attorney or maintain a legal department to handle its own legal business, furnish it opinions, legal counsel or advice for its own benefit in connectionwith theperformance of its lawful duties. We do not mean to hold otherwise. But a corporation mcty not furnish legal services to others and collect fees or profits therefor, directly or indirect1 ing so. t' and it may be enjoined from do2 R. C. L. 9 6; State ex rel. McICittrick V. C. S. Dudley & Co., 340 MO. 852, 102 s. W. (2d) 895.”

You state that the "impression is left that the printing house would furnish all the legal work for the sum of $30.00," ASsuming that such is thenature of the contractmade by the corporation, acti_ngthrough its solicitingagent, it is our opinion that it is illegal,being in contravention of Section 7 of Article 430a of.,e

Honorable D. RichardVoges, Page 11

the Penal Clode;that the responsibleofficers of the corporationand its solicitingagentmay be prosecutedunder Section 6.of said article; and that an injunctionmay be secured toprevent the corporation and its agents from a violation of said article.

Yours very truly

ATTORNEY GENERAL OF TEXAS

BY W. R. Allen

Assistant WRA:RS

Approved: October 16, 1941
$ - Grover Sellers

FirstAssistant Attorney General Approved: Opinion Commit&t

By: B. W. B., Chairman