Case Name: BAR ASSOCIATION OF TENNESSEE, INC., et al., Complainants, v. UNION PLANTERS TITLE GUARANTY COMPANY et al., Defendants
Court: Tennessee Supreme Court
Jurisdiction: Tennessee
Decision Date: 1959-02-25
Citations: 46 Tenn. App. 100
Docket Number: No. 3, Shelby Equity
Parties: BAR ASSOCIATION OF TENNESSEE, INC., et al., Complainants, v. UNION PLANTERS TITLE GUARANTY COMPANY et al., Defendants.
Judges: Carney, J., concurs.
Reporter: Tennessee Appeals Reports
Volume: 46
Pages: 100–152

Head Matter:
BAR ASSOCIATION OF TENNESSEE, INC., et al., Complainants, v. UNION PLANTERS TITLE GUARANTY COMPANY et al., Defendants.
326 S. W. (2d) 767.
No. 3, Shelby Equity
Western Section.
February 25, 1959.
Certiorari Denied by Supreme Court June 5, 1959.
Petition to Rehear Petition for Certiorari Denied July 27, 1959.
Vincent Beal and Ramsay Wall, Memphis, Shepherd, Heiskell, Williams, Beal & Wall, Memphis, of counsel, for Mid-South Title Co., Inc.
Walter P. Armstrong, Jr., and J. E. McCadden, Memphis, Armstrong, McCadden, Allen, Braden & Goodman, Memphis, of counsel, for Commerce Title Guaranty Co.
Jack Petree and Charles C. Crabtree, Memphis, amici curiae.
John S. Porter, Leo J. Buchignani, and Thomas P. Turley, Jr., Memphis, for appellees.

Opinion:
BEJACH, J.
This cause involves a suit by the Bar Association of Tennessee, Inc., The Memphis and Shelby County Bar Association, Inc., and Leo J. Buchignani, Ferber S. Floyd, David N. Harsh, David Keeble, and Thomas F. Turley, Jr., individual lawyers and members of • committees of said Bar Associations, against the Union Planters Title Guaranty Company, the Commerce Title Guaranty Company, and the Mid-South Title Company, seeking an injunction against said defendants to ' restrain them from the unlawful practice of law, which 'is alleged to consist of advertising for business, of drawing various papers and documents, such as deeds of conveyance', mortgages and trust-deeds, and other papers 'not ñécéssary for the functioning óf said defendants in their authorized field, namely that of guaranteeing titles to real estate.
Pending the hearing of this cause in the lower court, the Union Planters Title Guaranty Company disposed of its assets to the Commerce Title Guaranty Company, and discontinued its former activities. The hill was thereupon, by consent, dismissed as to said Union Planters Title Guaranty Company, and no appeal has been taken from that action of the Chancellor. The cause proceeded to a final adjudication by the Chancellor as to the other defendants. The cause was tried on proof taken by depositions and heard according to the forms of Chancery. The Chancellor dismissed the bill as to the defendant Commerce Title Guaranty Company, but sustained it, in part, as to the defendant Mid-South Title Company and enjoined it from, "Preparation of conveyancing or related instruments, and/or giving of legal advice relative thereto, when such acts are performed for, or on behalf of, parties to a real estate transaction, by any person, lawyer or other, in the salaried employment of the defendant, and/or when performed in its office or place of business, whether such acts are compensated for by defendant corporation, by the parties to the transaction or are uncompensated." The Mid-South Title Company was further enjoined from, "Knowingly issuing commitments to insure the title to real property where such commitments are procured or sought for the purpose of obtaining an opinion as to the validity or state of the title to said real property and without a present intention'on behalf of the applicant to procúre title insurance; and from'imposing any restrictions or conditions upon the manner or place of performing any acts required of a lawyer representing a party tó a real estate transaction." Both, the complainants and the defendant Mid-South Title Company prayed appeals and have perfected their.appeals to this court, where they have filed assignments of error.
The parties will be referred to, as in the lower courts, as complainants and defendants, or called by their respective names. It will not be necessary to copy into this opinion either the assignments of error of the complainants, or those of the defendant Mid-South Title Company. Both are somewhat lengthy. Suffice it to say, the respective assignments of error present adequately all questions which this court is called on to adjudicate. The complainants complain of the refusal by the Chancellor to sustain all of the allegations and prayers of their bill, but especially of his dismissal of the bill as to the defendant Commerce Title Guaranty Company. The defendant Mid-South Title Company complains of the action of the Chancellor in sustaining any of the allegations of the bill against it; and, in addition, it contends that even if some or all of the allegations of the bill should be sustained, no injunction should issue. On January 15, 1958, after the Chancellor had on November 22, 1957, filed his opinion in this cause, and on January 6, 1958, a supplemental opinion disposing of a petition to rehear, five staff attorneys of the defendant Mid-South Title Company filed a petition for leave to intervene in the cause. Said petition was filed prior to the entry of the final decree on January 31, 1958. On January 30, 1958, the Chancellor filed an opinion denying the right of intervention, but, by consent of all parties, Jack Petree, Esq., solicitor for those who sought thus to intervene, was appointed amicus curiae. In addition, Mr. Petree has been granted leave by an order entered in this court to appear as amicus curiae. Also, a petition for leave to file a brief as amicus curiae has been filed in this court by the Mortgage Bankers Association of Memphis and the Home Builders of Memphis, through their solicitor, Charles C. Crabtree, Esq. Such permission was granted, and the brief filed along with said petition has been considered.
Although the record before us is quite lengthy, consisting of 541 pages, in addition to numerous exhibits filed in the cause, there is little or no dispute as to the facts of the case. These facts are fully set out in the opinion of the learned Chancellor filed November 22, 1957, together with his reasoning and ruling on the issues presented. From that opinion we quote, as follows:
"The suit was filed on September 30, 1955. Subsequently, Union Planters Title Guaranty Company sold its physical assets, including its abstract plant, to Mid-South Title Company and is not now engaged in any manner in the title insurance business. Upon motion of complainants, the action as to Union Planters has been dismissed. Two defendants therefore remain — Mid-South and Commerce Title Guaranty Company.
"Complainants admit that defendants are entitled to engage in the title insurance business, but they allege that in doing so, some of defendant's acts constitute the unlawful practice of law, which complainants want enjoined. Defendants deny that any of their acts are unlawful or that an injunction should issue.
"The respective positions of the parties will be treated more carefully hereinafter.
"I. The Position of Commerce.Title Guaranty Comr pmvy
"In 1954, prior to the filing of tlie bill, Mid-South and Commerce Title entered into a contract for a period of twenty-five years whereby Mid-South became the exclusive agent for Commerce Title in the issuance of title policies. By this agreement, Commerce Title assumed the status of an insurer of all of the business written by its agent, Mid-South, although Mid-South retains some liability under the policies written. None of the activities of which the bill complains are directly engaged in by Commerce Title or its employees. As a matter of fact, the proof shows that the only full-time employee of Commerce Title is its president and general counsel, the Honorable Samuel 0. Bates. There is no proof to the effect Judge Bates examines titles, prepares instruments, closes trades, or in any manner performs any act which might be construed as the unlawful practice of law.
"Nevertheless, complainants say that any relief to which they are entitled should be directed toward both defendants because of their relationship to each other. Commerce Title takes the position that because of its contract with Mid-South, it is 'irrevocably wedded' to Mid-South for a period of twenty-five years and, therefore, any action of the Court detrimental to Mid-South would indirectly affect it.
"The Court is impressed with the attitude of Commerce Title and considers it a noble gesture to offer to stand by the side of its bride, for better or for worse. The suit, however, seems to be complicated enough without involving an unnecessary party. Not one act of which the Bar Associations complain can be attributed to Commerce Title, and the Court doesn't feel obligated to permit a party to remain in the lawsuit just for the ride. The suit as to Commerce Title is therefore dismissed and Mid-South remains as the only defendant.
"II. Baohgronnd and History
"For many years Commerce Title and Union Planters have operated title insurance business in Memphis. About 1946 Mid-South was chartered and became a competitor of these two corporations. There is no doubt that the popularity of title insurance has greatly increased in recent years with the public. Some of this has been brought about by the advertising and solicitation for business of which the Bar complains. Regardless of how defendant obtains its business, it is apparent that many purchasers of realty, and practically all lenders who furnish the funds for financing, insist that the title to the property be adequately insured. It is interesting, then, to follow the procedure when application for title insurance is made.
"Defendant says that the customer is first advised that it is necessary for him to obtain legal assistance in consummating the real estate transaction so that the title policy may issue. Further, that whenever the customer requests any particular attorney, it honors this request; that the customer is therefore given a choice as to who will handle the legal aspects of the transaction for him; that if no choice is made, defendant will, upon the customer's request, recommend a lawyer.
"Defendant employs, on a salary, several licensed attorneys who are referred to as its staff attorneys. In addition, there are a total of about 106 lawyers engaged in private practice Rere who are approved by defendant to examine titles. These are referred to as outside attorneys. Defendant says that it relies upon the title examination of these outside attorneys in about fifty percent of the titles which it insures.
"Lawyers who examine titles for defendant are compensated for this services as follows. In the case of the staff attorneys, they are paid a fixed salary. Outside attorneys are paid a percentage of the title premium, generally one-third of the charge made.
"Prior to 1946, the title companies made no charge to its customers for preparing the conveyancing instruments where title policies were requested. The Bar Association complained of this practice and thereafter an 'attorney' or 'instrument' fee was charged for this work. When instruments were prepared by staff attorneys, the fees were collected by defendant and paid to their attorneys as funds were disbursed. When an outside attorney handled the transaction, he was paid a fee by' his client. Subsequently, staff attorneys requested that instrument fees not be paid to them following each closing, but that the fees be held and pooled and distributed to the staff attorneys as requested by them, generally weekly or monthly. The proof shows that the title companies do not share in the instrument fees which their staff attorneys receive and that the fees are in addition to the salaries paid to these attorneys.
"Complainants say that defendant engages in the unlawful practice of law by the preparation of instruments and giving advice relative thereto; by holding itself out as performing legal services, and by serving as a con duit for channeling legal business both to its staff and its outside lawyers.
"Defendant contends: That it does not draft legal instruments nor hold itself out to the public as doing so nor furnish legal advice; that the instruments are prepared and advice given by independent attorneys, who do not act as representatives of defendant, but who act on their own behalf, in an independent attorney-client relationship with defendant's customers; that defendant does not control in any manner the activities of its staff or outside attorneys; that all fees paid for advice and preparation of instruments are retained by these attorneys; that should its customers not have attorneys of their own choice, defendant, acting as agent for its customers, employs attorneys for them, which they are entitled to do.
"In the alternative, defendant says: That if there is anything improper in the procedure which it now follows, it nevertheless should be permitted to have instruments prepared at no charge to its customers because it has an interest in the correctness of the instruments; that this is incidental to its business and that it is the 'real party in interest' to the document prepared, since it must insure the risk; further, that the public interest is best served by permitting the same attorney who examined the title to prepare the instruments.
"III. The Procedure in Issuing the Title Policy
"In order to thoroughly consider the charge of unlawful practice, the Court feels it proper to outline in detail the procedure followed in issuing a title policy. The steps are:
"A. Examination. When the order is placed for title insurance the matter is referred to an attorney who proceeds to:
"(1) order an abstract of title;
"(2) examine the abstract and other pertinent records;
" (3) issue his opinion or specification of requirements to perfect the title so that instruments may be drawn, the sale closed and the policy written.
"B. Preparation for Closing.
"(1) Any instruments necessary to meet the requirements are prepared, such as affidavits of heirship. If the title examination reveals any tax or other lien against the property, the attorney will either insist that the lien be immediately satisfied or that funds be held out of the settlement for this purpose.
" (2) The attorney then prepares the necessary instrument to convey title, that is, the warranty deed to be executed by the seller. It is customary to prepare an affidavit against mechanic's liens upon the property, which is also executed by the seller. If a loan is involved, the same attorney usually prepares the trust deed or notes to be executed by the purchaser. Other legal documents, as required, are drafted.
" (3) Any advice requested by either the seller or purchaser relative to the status of the parties or to the legal effect of the instruments is given by the attorney who prepares them.
"C. Closing.
"(1) Upon the preparation of all necessary instruments, the parties are generally called together to execute them.
" (2) At this time, they are presented with a settlement sheet which reflects the financial status of the parties, that is, the amount of money required by the buyer to complete the purchase, the sum which the seller will receive, and other pertinent information.
"(3) The attorney, or closer, either individually or through the title company, proceeds to disburse the funds as reflected by the settlement sheet.
"D. Issuance of Policy.
"(1) All instruments requiring recording are thereupon filed.
"(2) All instruments are examined to determine whether they conform to requirements and that they are correct in description and otherwise.
" (3) Upon being satisfied of these facts, the company then issues its policy of title insurance, either to the purchaser, as an owner's policy, to the lender, as a mortgagee's policy, and in some cases, to both.
"The position of the parties relative to each of these steps is as follows:
"Step A. Title Examination. Of the many features of this suit, this is the simplest to adjudicate because the contention of the parties is not in conflict. Complainants admit that defendant has every right to make the title examination. Defendant's charter permits this as does the Title Insurance Law, section 56-3401 et seq. T. C. A. Furthermore, all authorities considered hold that title companies may perform this step. The Court, therefore, holds that this does not constitute the unlawful practice of law.
"Step B. Preparation for Closing. This is the most difficult question raised in the suit, and will be treated in detail hereinafter.
"Step C. Closing. The execution of the deeds by the parties may be performed before any notary public, and does not involve the practice of law. The preparation of the settlement sheets, in the Court's opinion, is entirely a clerical procedure which does not require the services of a lawyer and, therefore, cannot be considered as the unlawful practice of law, and the Court so holds.
"Disbursements of funds, of course, may be done by any lawyer, layman, or corporation, so empowered, such as defendant. There is proof to the effect that many lenders of funds for the building and purchase of homes in this area are located away from here. It is a most natural requirement of these lenders that a financially sound institution handle disbursements of funds furnished.
"The chief objection which complainants raise to defendant engaging in Step C is that the parties to the transaction at this point seek legal advice as to the effect of their action. This is not necessarily so, the Court being of the opinion that the proper time to so advise the parties is upon the preparation of the instruments, covered in Step B. The Court, therefore, holds that nothing in Step C constitutes the unlawful practice of law.
"Step D. Issucmce of Policy. It is the Court's opinion that the title company has as much right to examine the conveyancing instruments, after they are prepared and executed, as it does to examine the title in the first place. These instruments must he correct, just as the title must be perfected, in order for the title policy to issue. The matter of recording the deeds is a mechanical act, as is the writing of the policies. The Court, therefore, holds that there is nothing to Step D which may he considered to he the unlawful practice of law.
"The subject of the litigation is therefore narrowed to defendant's activities involved in performing Step B. Each of the defenses previously set forth will he thoroughly considered.
"IV. Defenses: The Defendant Doesn't Prepare Instruments or Give Legal Advice
"The title company says: (1) That it does not draft instruments; (2) That they are prepared by independent lawyers, not acting as representatives or agents of defendant; (3) That a relationship of independent attorney-client exists between said lawyers and defendant's customers; (4) That defendant is entitled on behalf of its customers to employ lawyers for them, if so requested.
"A consideration of this proposition necessarily requires a separate analysis of work performed by staff attorneys and by outside attorneys.
"A. The Position of the Staff Attorney.
"(1) The first proposition is that defendant doesn't prepare the instruments. If it doesn't who does? Certainly, from the mechanical standpoint, defendant does. All stationery and supplies are furnished by defendant. The typewriter which the stenographer uses and the stenographer herself are furnished by defendant. The office space, telephone, furniture and equipment which the stenographer and which the staff attorneys use are furnished by defendant. No doubt defendant would say that the mechanical preparation of instruments is not contemplated in this discussion and is unimportant and trivial. If so, perhaps a practicing lawyer who pays his own expenses should be consulted.
"Who prepares the instruments from the legal aspect? Defendant's salaried staff attorney directs defendant's stenographer in the typing of the instruments and checks them for accuracy upon completion. It is evident that defendant does handle the legal phase of preparing instruments, through staff attorneys, on defendant's time, in defendant's office and with the aid of defendant's employees and equipment. There is no difference between this operation and as it existed prior to 1946 except that now staff attorneys receive a fee for work they formerly performed under salary arrangements with the title companies.
"The controlling factor, then, as to whether or not defendant prepares instruments is the receipt of fees by staff attorneys. Yet, defendant treats this so lightly that it now offers to waive fees and revert to the previous 'no charge' practice. By its inconsistent position, it has lost a sound basis on which to stand. The Court, therefore, reaches the inescapable conclusion that defendant does prepare the instruments, and as an incident, furnishes advice to its customers relative thereto.
" (2) The next proposition is that the instruments are drawn by independent lawyers, not noting for defendant. This calls for a consideration of the word 'independent'.
"The simplest definition for 'independent' comes from Webster's Elementary Dictionary. In part, this definition is: 'Not under another's control or rule; not having connections with any other or each other; separate';
"The Supreme Court of Tennessee has declared, in Buie 38, that 'the ethical standards relating to the practice of law shall be the Canons of Professional and Judicial Ethics of the American Bar Association'. Complainants point out that Canon 35 provides that the 'professional services of a lawyer should not be controlled or exploited by any lay agency, personal or corporate, which intervenes between client and lawyer. '
"Complainants say, further, that when staff lawyers represent the parties to a real estate transaction, as well as defendant, a situation arises where the interests of the parties could he 'adverse', which violates Canon 6; that in such circumstances, the interests of defendant would he paramount and that defendant thereby 'controls' the services of its lawyers in violation of Canon 35. Actually, there isn't much possibility of adverse interest appearing in these transactions, hut if they did, defendant would no doubt insist that the parties obtain separate counsel.
"But in considering the use of the word 'control', it is evident that both the employment and the income of staff attorneys is controlled by defendant corporation and to this extent these lawyers just can't be said to be entirely independent. Salaried persons generally can't afford to be.
"As for the rest of Webster's definition, the 'connections' between staff attorneys and defendant are self-evident. And to say that defendant and its staff attorneys are 'separate' is unrealistic. Therefore, under any reasonable interpretation of an 'independent' relationship with defendant, staff attorneys just won't qualify.
"(3) This brings on the third phase of this defense, that the 'independent lawyer-client' relationship exists between defendant's lawyers and its customers. The first requisite of this relationship is a client. There are not many requirements for being a client. He'd just be a person who needs legal aid and presumably can pay for it. He is entitled, however, to choose his own attorney, and to expect that he will be represented capably. The right by the client, then, to choose of select his own lawyer is the very essence of the relationship. When defendant's customers make application for a title policy, defendant says that a choice as to attorney is allowed. But if the customer has no choice, an attorney is assigned to him, and he takes what he gets. This is no reflection upon staff attorneys because they are all capable or they couldn't hold their jobs. But this doesn't alter the fact that the element of voluntary selection is often missing.
"For a true relationship to exist there must also be a lawyer — not just a person who owns a license but one who fulfills the exacting demands of the profession as well as the requirements of the public's conception. Since staff attorneys occupy a unique position in the law business, it might be well to compare them with private practitioners.
" (a) The method of which staff attorneys obtain their fee business is subject to question. When the customer has no lawyer he is introduced to a staff attorney. This is an indirect, but inescapable, result of the defendant's advertising and solicitation. Defendant says it doesn't advertise legal services but, even so, the effect is to keep its staff attorneys well supplied with legal business. It is far fetched for defendant to assert as a comparison that many lawyers who represent liability insurance carriers obtain their business as a result of the advertising which the insurance carrier has done in an effort to obtain new policly holders. The facts of the case at bar prove a far more direct effect realized from advertising and solicitation. Many a private practitioner would consider himself in paradise to have his business brought to him daily on a platter. The only conclusion is that defendant does 'channel' business to its staff attorneys.
"(b) As previously stated, staff attorneys pay no overhead expense in the handling of their fee business. The result is that they are either able to charge less fees for their services or they show more profit for time spent than the practicing attorney, which is a very unfair advantage and results in unfair competition. The fees charged by staff attorneys, although based upon the Bar's Minimum Pee Schedule, frequently represent the maximum fees which may be charged by other lawyers. Thus the matter of instrument fees for the whole Bar is controlled to some extent by a handful of staff attorneys, and indirectly by defendant, because it makes the lower fees possible.
"One of the excuses advanced by defendant for the preparation of instruments by its staff attorneys is that this is more economical and, therefore, the public is better served. This thought has also been expressed by-certain of defendant's witnesses, prominent local realtors and builders. The Court finds fault with this attitude because the profits and commissions made by the realtors and builders are not based upon the economy to the public, but are based upon what will fairly compensate these people for their services. This should be the basis for payment of services of attorneys, but the court knows that the instrument fees charged by staff attorneys 'control the market' to some extent, regardless of the value of the services rendered.
"(c) Defendant urges that the interest of the public and the public welfare require that title policies should be issued with efficiency, expediency and economy which is accomplished where staff attorneys are used; that when the public welfare conflicts with that of the Bar, the interest of the bar should give way. Since the public welfare has been made such an issue, it is well to consider the subject from all angles.
"The Court is of the opinion that the dignity of the legal profession is also a matter of public interest and that it is in the public interest that this be upheld; that the concept which the public has of a lawyer is important; that his surroundings and environment mean something to the public; that the public interest is not best served by having the title company present to its customers a staff lawyer, practicing his profession in the middle of a business office, surrounded by every indicia of commei*-cialism, with a law library, trademark of the profession prominent by its absence. It is quite one thing for a lawyer, in the full-time salaried employ of a corporation, to be located in such surroundings. It is quite another to have Mm held out to the public as an independent, private practitioner.
' ' There are many people who fortunately and happily have no occasion to come in contract with lawyers except in the purchase or sale of a home. The Court doesn't think it is in the interest of the public to gauge the whole legal profession by the situation in which it finds these staff attorneys. Clothes don't make the man. Neither do dignified professional surroundings make a lawyer. But this is what the public expects.
" (d) One of the important services undertaken by the legal profession is the representation of indigent clients. Every practicing attorney, in the course of his career, is expected to and does employ some part of his time which might be used profitably otherwise, in representing people who can't pay a fee. There is really no occasion for staff attorneys to perform free legal services because, obviously, people who can trade in property can afford the incidental expense. But the fact remains that they don't make this important contribution to the public welfare.
"The Court wishes to emphasize the fact that this is not a personal attack upon the staff attorneys. It is, however, a challenge to the system which employs them. The Court recognizes that these are able men in their line and holds them in the highest personal regard. They have chosen, however, to use their licenses differently from the practicing attorney.
"For the many reasons stated, some more relevant that others, the Court just can't accept defendant's theory that an independent lawyer-client relationship exists between its lawyers and its customers.
"(4) The last proposition raised in this defense is that defendant, as agent, is entitled, upon request, to employ an attorney for its customers, which employment would create the relation of attorney and client between the principal and the attorney so employed. The Court acknowledges this to be a correct legal position as pronounced by our Supreme Court in the case of State [ex rel. District Attorney] v. Lytton, 172 Tenn. 91, 110 S. W. (2d) 313. But this Court doubts that the Supreme Court contemplated any such situation as is found here, the 'independent' lawyer feature being absent.
"Upon a consideration of all these matters, reason requires that the Court reject defendant's theory that it does not prepare the conveyancing instruments where same are prepared by a lawyer in the salaried employ of defendant.
"B. The Position of Outside Attorneys.
"The Court accepts defendant's theory that it does not draft instruments, when this work is performed by outside attorneys, that is, private practitioners on defendant's approved list.
"But the Bar finds some fault with the activities of these lawyers, which requires comment upon the subject.
" (1) Complainants say that defendant serves as a conduit for business which comes to outside lawyers just as in the case of the business which comes to the staff attorneys. This may be, but under the authority of the Lytton case, defendant has the right to employ counsel for its customers upon their request. The relationship between defendant and its outside attorneys is the situation which this Court believes our Supreme Court had in mind in its holding — not one where the attorney is in the salaried employment of the agent.
"But in asserting this contention, the Court thinks complainants overlooked one important point. While it is true that about one-half of its legal business is performed by these outside lawyers, it is not true that this is all handed to them by defendant as in the case of staff attorneys. Many entirely capable lawyers who, twenty years ago, would have closed real estate trades, using their own opinions as a basis, now recognize the fact that title insurance gives more security to their clients, considering the imminence of death and the possibility of insolvency. As a result, many attorneys, in their clients' best interest, do recommend title insurance and proceed to take all steps required to obtain it. Their position, then, is not that of having this business handed to them, but, rather, of bringing the business to the title companies who refer it back to them for processing.
" (2) Complainants also say that to some extent the outside attorneys are guilty of splitting fees in that they take a percentage of the title premiums as their fee for examining the title. Defendants say this is not the case at all; that the matter of splitting fees is not involved because the outside lawyers take a percentage of the premium charged, which is not a legal fee.
" (3) The Court considers that the serious question of unlawful practice involved is not the 'splitting' but rather the 'control' of fees paid these lawyers for title examination, that is, a flat one-third of the title premium regardless of the amount of work performed. For instance, if the sale involved a vacant lot with a value of $1,000.00, the title premium is $25.00, of which the fee is one-third, or $8.33, which, is too small to really justify a lawyer's time. Actually, the premium charged would need to be $75.00 in order to pay the lawyer the long recognized minimum of $25.00 for title examination. The Court realizes, of course, that where a title premium of only $25.00 is being charged, defendant can't pay a $25.00 fee.
'£ The fault which the Court finds with the present system is that the fee is fixed and controlled entirely by the defendant, with no consideration given to the value of services by the examining attorney. This, the Court thinks is improper. The Minimum Pee Schedule recommended by the local Bar Association does not set a minimum fee for this work, hut this statement is made:
" 'The price to be charged for examination of title shall he based solely upon the contractual relation of the individual with his client, taking into consideration the various factors of work and responsibility involved.'
' ' The Court does believe that a fee, which would more reasonably compensate, could be paid outside attorneys for examining titles. To this end, the parties to this action might cooperate. Outside Shelby County, defendant apparently charges a premium of $3.50 per thousand for the insurance risk, to which is added the charge made by the examining attorney. This appears to the Court to be reasonable.
"V. D efenses: Defendant Is the ' Real Party in Interest ' and is Therefore Entitled to Prepare the Instruments.
"Defendant's alternative defense is that if the Court finds anything improper in its present method of operation, nevertheless, defendant should be permitted to pre pare instruments at no charge to its customers, because defendant is the real party in interest to said documents.
"From a practical standpoint, the first apparent objection to this procedure is that tbe inherent right of the outside attorney to prepare instruments for a fee may be eliminated. Granted, that defendant could adjust the salaries of its staff attorneys to compensate for a loss of instrument fee income. But where does this leave those outside lawyers who perform one-half of the legal services required by defendant. There would be no fees from clients. Defendant could pay them flat fees. This would probably require an increase in title premiums but whether or not it does, it is 'kidding the public' to say that no charge is made for drafting instruments. This fact is astutely pointed out in the Hexter case, quoted hereinafter.
"But aside from this question, the legal position taken by defendant has been tried many times before and the Court has sound authorities on which to rely in reaching a decision.
"Title companies occupy a relationship to law unlike that of any other commercial enterprise known to the Court. The basis for a title policy is an opinion rendered by a qualified lawyer, and supported by legal instruments which fulfill the requirements. The title business is absolutely dependent upon and can't operate without this close association with the legal profession.
"In considering this question, therefore, the Court feels that only those authorities which deal with the title business are important and controlling, rather than those involved with other commercial endeavors. Unfortunately, there is no reported Tennessee ease relating di rectly to this subject. The Court has therefore carefully considered decisions rendered elsewhere, and especially those relied upon by both parties to this action."
It is apparent from a consideration of the Chancellor's opinion, and especially from that portion of same quoted above, that his decision was influenced or motivated by a desire to protect the lawyers of general practice from what he considered unfair competition. In our opinion, this is not the proper test to be applied in determining whether or not defendants, or either of them, are guilty of unlawful practice of law and whether or not an injunction should issue.
All the defendants are, or were, operating under the provisions of Chapter 1734, Public Acts of 1955, carried forward into Tennessee Code Annotated as Sections 56-3401 to 56-3427, entitled "Title Insurance Law"; and there is no claim that they or either of them have failed to comply with the provisions of that law.
The "practice of law" and what constitutes "law business" in Tennessee are defined by statute, as set out in Section 29-302, T. C. A., which is as follows:
"29-302. Definition of practice and business.— The 'practice of law' is defined to be and is the appearance as an advocate in a representative capacity or the drawing of papers, pleadings or documents or the performance of any act in such capacity in connection with proceedings pending or prospective before any court, commissioner, referee or any body, board, committee or commission constituted by law or having authority to settle controversies. The 'law business' is defined to be and is the advising or counseling for a valuable consideration of any person, firm, association, or corporation, as to any secular law, or the drawing or the procuring of or assisting in the drawing for a valuable consideration of any paper, document or instrument affecting or relating to secular rights, or the doing of any act for a valuable consideration in a representative capacity, obtaining or tending to secure for any person, firm, association or corporation any property or property rights whatsoever. ' '
Tennessee cases dealing with the subject of unlawful practice of law are Grocers & Merchants' Bureau v. Gray, 6 Tenn. Civ. App. 87; Haverty Furniture Co. v. Foust, 174 Tenn. 203, 124 S. W. (2d) 694; State ex rel. District Attorney v. Lytton, 172 Tenn. 91, 110 S. W. (2d) 313; and Union City & Obion County Bar Ass'n. v. Waddell, 30 Tenn. App. 263, 205 S. W. (2d) 573. None of these cases, however, throws any real light on the issues to be determined in the instant case, and we, therefore, feel constrained, as did the learned Chancellor, to consider the case before us as one of first impression in Tennessee. In disposing of this question, it is our idea that, in fixing the public policy of this State, we should consider of primary importance the effect which it will have in protecting the rights and interests of the public, rather than the benefits which may accrue to lawyers of this State, represented by the Bar Association complainants. As was stated by the Committee on Unauthorized Practice of Law of the American Bar Association, in 56 American Bar Association Reports, pages 470-477:
"The practice of law by unauthorized persons is an evil because it endangers the personal and property rights of the public and interferes with the proper administration of justice. It is not an evil because it takes away business from tbe lawyers."
To tbe same effect, we quote tbe language of tbe Supreme Judicial Court of Massachusetts, as follows:
' Tbe justification for excluding from tbe practice of law persons not admitted to tbe bar is to be found, not in tbe protection of tbe bar from competition, but in tbe protection of tbe public from being advised and represented in legal matters by incompetent and unreliable persons over whom tbe judicial department could exercise little control." Lowell Bar Ass'n. v. Loeb, 315 Mass. 176, 52 N. E. (2d) 27, 31.
Apparently entertaining tbis same point of view, tbe Supreme Court of Tennessee, in a disbarment case, said:
"Tbis power of disbarment is not exercised by tbe courts for tbe purpose of enforcing remedies between tbe parties, but to protect tbe court and tbe public against the official administration of an attorney guilty of unworthy practices in bis profession. ' ' Davis v. State, 1893, 92 Tenn. 634, 640, 23 S. W. 59, 61.
In tbe case of Conway-Bogue Realty Investment Co. v. Denver Bar Ass'n, 135 Colo. 398, 312 P. (2d) 998, 1007, in denying injunctive relief prohibiting real estate brokers from preparing contracts, deeds, deeds of trust and releases, and giving advice to tbe parties relative to tbe legal effect of such instruments, tbe Supreme Court of Colorado said:
"We feel that to grant tbe injunctive relief requested, thereby denying to the public tbe right to conduct real estate transactions in tbe manner in which they have been transacted for over half a century, with apparent satisfaction, and requiring all such transactions to be conducted through lawyers, would not be in the public interest; that the advantages, if any, to be derived by such limitations are outweighed by the convenience now enjoyed by the public in being permitted to choose either their broker or their lawyer to do the acts or render the services which the plaintiffs seek to enjoin."
In Tennessee, the right of real estate brokers to draw documents appertaining to the business of real estate brokers is expressly preserved by statute, which, to some extent, in our opinion, indicates what the public policy of Tennessee should be in the instant case. The statute which prohibits the drawing, by real estate brokers, of legal documents not connected with the real estate business, but preserves that right to them, if such document pertains to real property, is set out in Section 62-1325, T. C. A., as follows:
"Any person licensed hereunder that engages in drawing any legal document other than contracts to option, buy, sell, or lease real property, may have his or her license revoked or suspended as provided in this chapter."
Although no similar provision is contained in the "Title Insurance Law", Sections 56-3401 to 56-3427, T. C. A., we think the principle is the same, and that title insurance companies should not, by narrow or strained construction, be prohibited by court decisions from drafting legal documents which are intimately connected with the business for which they are chartered. The public policy of this State, established by court decisions, should be kept in harmony with public policy established by statute. This, conclusion is fortified by the reasoning of the Supreme Court in the case of Haverty Furniture Co. v. Foust, 174 Tenn. 203, 124 S. W. (2d) 694.
It is conceded on behalf of complainants in the instant case, that the defendants may properly ascertain as a condition precedent to the issuance of a title guaranty policy or a commitment for such policy, that the title to be guaranteed is good, and that for such purpose they may properly have the investigation made by staff attorneys or other lawyers employed for that purpose. On the other hand, it is contended that the drafting of a deed, or trust deed, to convey the title can only be done properly by an attorney employed by the grantor or borrower, as the case may be, and that it is improper for such work to be done by either the staff lawyers or outside lawyers employed by defendants. Likewise, it is contended that it is improper for defendants' lawyers to draft or procure the execution of instruments necessary for the correction of defects in titles, or the making of such titles insurable. Also, it is contended that defendants should not be permitted, through their attorneys, to prepare and participate in escrow agreements where the issuance of a title guaranty policy is not contemplated. It is asserted that participation in or performance of any or all of these functions by defendants, constitutes unlawful practice of law. Many cases are cited by counsel for complainants as authorities to sustain this contention. Among the cases which most strongly support the contentions of counsel for complainants are Hexter Title & Abstract Co., Inc. v. Grievance Committee, 142 Tex. 506, 179 S. W. (2d) 946, 157 A. L. R. 268; Title Guaranty Co. v. Denver Bar Ass'n., 135 Colo. 423, 312 P. (2d) 1011; and Pioneer Title Insurance & Trust Co. v. State Bar of Nevada, Nev., 326 P. (2d) 408.
The cases supporting the contentions of complaint are, in our opinion, more than offset by cases sustaining, or tending to sustain, the position of defendants, such as LaBrum v. Commonwealth Title Co. of Philadelphia, 358 Pa. 239, 56 A. (2d) 246; Cooperman v. West Coast Title Guaranty Co., Fla., 75 So. (2d) 818; People v. Title Guarantee & Trust Co., 191 App. Div. 165, 181 N. Y. S. 52, affirmed in 230 N. Y. 578, 130 N. E. 901; Ingham County Bar Ass'n v. Walter Neller Co., 342 Mich. 214, 69 N. W. (2d) 713, 53 A. L. R. (2d) 777; Cowern v. Nelson, 207 Minn. 642, 290 N. W. 795; Lowell Bar Ass'n v. Loeb, Mass., 315 Mass. 176, 52 N. E. (2d) 27; and Liberty Mutual Ins. Co. v. Jones, 344 Mo. 932, 130 S. W. (2d) 945, 125 A. L. R. 1149. A careful investigation of all of the cases cited by counsel for the respective parties and by the amici curiae, indicates that the weight of authority is with the defendants.
In LaBrum v. Commonwealth Title Co., 358 Pa. 239, 56 A. (2d) 246, 248, the Supreme Court of Pennsylvania said:
"All the acts in question have to do with the transfer of title, that is, with conveyances and conveyancing. In order to decide whether defendant shall insure a title, defendant must first examine and pass upon the instrument or instruments evidencing the transfer. Its charter authorizes all steps necessary for the enjoyment of its corporate franchise. If examination of the instrument discloses defects the insurer thinks must be corrected before the title can be insured, it must of course be redrawn in the inter est of both insurer and insured. Drawing the instrument correctly in the first place is no more unauthorized practice of law than examining or approving it after it has been drawn, or returning it for correction after it has been found to have been erroneously drawn. ' '
Likewise, in Cooperman v. West Coast Title Company, Fla., 75 So. (2d) 818, 821, the Supreme Court of Florida, said:
"So we decide that what the companies do to inform themselves about the advisability of issuing a commitment and what they do to accomplish a transfer of title or interest of such kind that a policy of title insurance is warranted are not the services the performance of which amount to unauthorized practice of law."
In State Bar Association of Connecticut v. Connecticut Bank & Trust Co., 20 Conn. Sup. 248, 131 A. (2d) 646, 648, the Supreme Court of Connecticut said:
"It should be borne in mind through this discussion that the choice of a criterion as to what constitutes the practice of law must be made from the standpoint of public protection, not from that of private advantage for either banks or lawyers. Merrick v. American Security & Trust Co., 71 App. D. C. 72, 107 F. (2d) 271, 282."
In Cowern v. Nelson, 207 Minn. 642, 290 N. W. 795, 797, the Supreme'Court of Minnesota, said:
"It is the duty of this court so to regulate the practice of law and to restrain such practice by laymen in a commonsense way in order to protect primarily the interest of the public and not to hamper and burden such interest with impractical technical restraints no matter how well supported such restraints may be from the standpoint of pure logic."
In Auerbacher v. Wood, 139 N. J. Eq. 599, 53 A. (2d) 800, 802, the Supreme Court of New Jersey, said:
' ' The court should be very cautious about declaring that a widespread, well-established method of conducting business is unlawful, or that the considerable class of men who customarily perform a certain function have no right to do so, or that the technical education given by our schools cannot be used by graduates in their business."
Fully sensible of the great responsibility that rests on us in the instant case, and bearing in mind the wisdom embodied in the precedents and decisions of other jurisdictions, we have reached the conclusion that while some of the activities of the defendants constitute 'practice of law" or the doing of "law business", they are all legitimately incidental to the main or principle business of defendants, which is title insurance; and, consequently they should not be adjudged to constitute unlawful practice of law, nor enjoined as such.
The view of the case which we have taken makes it unnecessary for us to consider or discuss whether the Chancellor was right or wrong in excluding the defendant Commerce Title Guaranty Company from the injunction granted by him against the Mid-South Title Company, its agent, and in dismissing the bill against the Commerce Title Guaranty Company.
It results that the action of the Chancellor in dismissing the bill against the Commerce Title Guaranty Company must he affirmed, but the decree granting injunctive relief against the Mid-South Title Company must be reversed and the bill filed in this cause dismissed. The costs of the cause will be adjudged against the complainants and their sureties on the cost and appeal bonds filed by complainants.
Carney, J., concurs.