L. Meisel & Co. v. National Jewelers' Board of Trade

This case presents for determination a question which has been very generally discussed during the past year, namely, what amounts to the practice of law on the part of a corporation. The respondent Meisel, doing business under the name of L. Meisel & Co., went to the office of the appellant, the National Jewelers’ Board of Trade (a New York membership corporation), in 1913, and asked it to collect a claim which he had against one E. W. Wedgren, who was in bankruptcy. Respondent was informed that - Wedgren, was in bankruptcy, and that it would be necessary for him to file a claim in bankruptcy with the appellant to enable it to collect the claim. Respond ent was instructed to bring to the appellant the notes representing the claim, together with a statement of his claim, which he did. Then

Meisel also had a claim against a concern known as the Pacific Jewelry Company, and went to see the Board of Trade in regard thereto, and requested it to collect the claim. The representative of the Board of Trade asked Meisel to make him a statement of his claim, which he did. The claim was upon past-due promissory notes, which Meisel brought to the Board of I'rade and left with it. The Board of Trade informed Meisel that the Pacific Jewelry Company had made an assignment for the benefit of creditors. Meisel signed certain papers which the Board of Trade prepared for him, but could not recollect their nature or contents. Subsequently the Board of Trade sent its check to Meisel for $28.06, • representing the amount collected by it from said bankrupt, less $3.20 fees. Plaintiff did not cash the check, but tendered it to the Board of Trade on the trial; the tender being refused. At the time of the transactions Meisel was not a member of the Board of Trade.

The Board of Trade’s form of voucher, attached to the checks, is of interest. The following is the one used in the matter of the bankruptcy of Wedgren:

Claim against F. W. Wedgren Claim No. B1700

Amount collected 1st dividend 5%l................................... $9 76

ea-a^e.

Interest ..........................

Costs ............................

Less: Paid direct.......................

Previously remitted..............

Mdse, returned...................

Total ................................................

Less: Fees .......................................................

Suit fee..................................................... 3

Disbursements ..............................................

Exchange ..................................................

Amount of check................................................... §6 76

The significance of the items of “costs,” “fees,” and “suit fee” is obvious. Has the appellant, a membership corporation organized as a Board of Trade “for purposes other than pecuniary profit,” the right to represent a creditor in a bankruptcy proceeding, or in proceedings on behalf of a creditor in the matter of the general assignment of a bankrupt for the benefit of creditors, to advise the creditor in such procedings, to undertake and do all the things appertaining to the prosecution of the creditor’s claims in such proceedings, to take the steps necessary to protect the creditor’s interests therein, and make a charge for such services ? The- answer to the question depends upon

[1] That the practice of law by a corporation is contrary to public policy and malum in se has been decided by the Court of Appeals. Matter of Co-operative Law Co., 198 N. Y. 479 , 483, 484, 92 N. E. 15 , 32 L. R. A. (N. S.) 55 , 139 Am. St. Rep. 839 , 19 Ann. Cas. 879. The sound reasons for so. holding were fully and convincingly stated therein by Judge Vann, and need not be repeated. That the practice of law by a corporation is malum prohibitum is obvious upon a mere reading of section 280 of the Penal Law. If section 280 is subdivided into its various parts, and the things prohibited are stated separately, it appears that under this section of the Penal Law it is unlawful for any corporation :

(1) To practice or appear as an attorney at law for any person other than itself in any court in this state, or before any judicial body.

(2) To make it a business to practice as an attorney at law for any person other than itself in any of said courts.

(3) To hold itself out to the public as being entitled to practice law.

(4) To render or furnish legal service or advice.

(5) To furnish attorneys or counsel.

(6) To render legal services of any kind in actions or proceedings of any nature or in any other way or manner.

(7) In any other manner to assume to be entitled to practice law.

(8) To assume, use, or advertise the title of lawyer or attorney at law, or equivalent terms, in such manner as to convey the impression that it is entitled to practice law, or to furnish legal advice, service, or counsel.

(9) To advertise that it has, owns, conducts, or maintains a law office, or an office for the practice of law, or for furnishing legal advice, services, or counsel.

(10) To solicit itself, or through its officers, agents, or employes, any claim or demand for the purpose of bringing an action thereon, or of representing as attorney at law, or for furnishing legal advice, services, or counsel to a person sued or about to be sued, br who may be affected by any action or proceeding which has been or may be instituted in any court or before any judicial body, or for the purpose of so representing any person in the pursuit of any civil remedy.

[2] In determining whether the transactions herein disclosed constituted the practice of law and the furnishing of legal services by the Board of Trade, a sensible and sufficient definition is found in Re Duncan (1909) 83 S. C. 186 , 189, 65 S. E. 210 , 211 (24 L. R. A. [N. S.] 750, 18 Ann. Cas. 657):

“It is too obvious for discussion that the practice of law is not limited to the conduct of cases in courts. According to the generally understood definition of the practice of law in this country, it embraces the preparation of

pleadings and other papers incident to actions and special proceedings * * * on behalf of clients before judges and courts, and in addition conveyancing and preparation of legal instruments of all kinds, and, in general, all advice to clients, and all action taken for them in matters connected with the law. An attorney at law is one who engages in any of those branches of the practice of law. The following is a concise definition given by the Supreme Court of the United States: ‘Persons acting professionally in legal formalities, negotiations, or proceedings by the warrant or authority of their clients may be regarded as attorneys at law within the meaning of that designation, as employed in this country.’ Savings Bank v. Ward, 100 U. S. 195 [ 25 L. Ed. 621 ]. Under these definitions there can be no doubt that Duncan engaged in the practice of law.”

Thornton on Attorneys at Law, in section 69, defines the practice of law in the same terms. In Eley v. Miller, 7 Ind. App. 529 , 535, 34 N. E. 836 , 837, the court, while stating that, as generally understood, tire practice of law is the doing or'performing of services in a court of justice, in any matter depending therein, said:

“But in a larger sense it includes the legal advice and counsel, and the preparation of legal instruments and contracts by which legal rights are secured, although such matter may or may not be depending in a court.”

That the definition of what constitutes the practice of law stated in Re Duncan, supra, should and will be accepted and applied by the courts in this state is clearly indicated by the cases of Matter of City of New York, 144 App. Div. 107 , 128 N. Y. Supp. 999 , Matter of Bensel, 140 App. Div. 944 , 126 N. Y. Supp. 1121 , affirmed 201 N. Y. 531 , 94 N. E. 1091 , and Buxton v. Lietz, 136 N. Y. Supp. 829 , and 139 N. Y. Supp. 46 .

Now, consider the services ordinarily incident to representing a creditor and enforcing his claim in bankruptcy matters, such as the Wedgren Case herein involved. The promissory notes required examination as to execution and the form of the signature; i. e., whether the maker was liable in an individual or representative capacity, whether signed in a trade-name, as distinguished from an individual name, etc. Inquiry was necessary concerning the inception and delivery of the notes, whether for value or accommodation, and as to any possible defenses or counterclaims. Acting on this information, the client would be advised whether to proceed. The next step would be the preparation of proof of claim. This is a legal instrument, and the mere fact that it is on a printed form and might be filled out by a layman does not change its character, any more than the fact that confessions of judgment, bills of costs, affidavits of service, and many simple forms of pleading on notes and for goods sold and delivered are frequently printed changes their character. The subsequent steps that ordinarily occur, such as joining with one or another group of creditors in the selection of a trustee, expediting or opposing the disposition of the assets of the bankrupt estate, the consideration of proposed compromises, reorganizations, and substitution of securities for claims, the various problems incidental to receivership, the form in which dividends are received and receipted for, and innumerable other details intervening between the filing of the petition in bankruptcy and a discharge, all involve at one stage or another proceedings on behalf of the client in courts, the preparation of legal instruments of various kinds, the

These services require special knowledge, the fidelity of the relation between attorney and client, responsibility to the courts and, for success, experience in what is generally recognized as a special line of- legal work. Frequently the relation requires actual appearance in court and the conduct of litigation. That such proceedings are contemplated and provided for by this Board of Trade in its relations to its clients is shown by its printed form of voucher, containing provision for “costs,” “suit fee,” and “fees.” That the services involved and contemplated by this Board of Trade in representing plaintiff in the bankruptcy of Wedgren and prosecuting his claim therein were legal services seems too plain to require further consideration. Similarly, in representing him and prosecuting his claim against the Pacific Jewelry Company, whose property was in the hands of a general assignee for the benefit of creditors,- the services were legal services, and for the most part similar in kind to those already enumerated. Ordinarily, a proper representation of the creditor in such matters involves an examination of the assignment, consideration of its validity, the sufficiency and form of the assignee’s bond, an examination of schedules, alertness against -the allowance of improper claims, keeping track of suits brought by and against the assignee, the accounting, and a multitude of other important details that will at once occur to any practicing lawyer.

Appellant cites Matter of Associated Lawyers Co., 134 App. Div. 350 , 119 N. Y. Supp. 77 , as holding that a corporation can act as a collection agency. The court did not so hold. That was an application made under section 280 of the Penal Law for the approval by the court of the petitioner under the provision that the prohibitions of the section should not—

“apply to organizations organized for benevolent or charitable purposes, or for the purpose of assisting persons without means in the pursuit of any civil remedy, whose existence, organization or incorporation may be approved by the Appellate Division.”

The court said:

“It seems to us quite evident that the only authority given to this court is to approve ‘organizations organized for benevolent or charitable purposes, or for the purpose of assisting persons without means in the pursuit of any civil remedy.’ While it has never been legal for a corporation to practice law, a system has grown up by which corporations undertake to procure attorneys for the transaction of the law business of its clients, and while fhe legality of such corporate action has been doubted, the impropriety of allowing corporations to enter into such business has been universally recognized and by this legislation it has been prohibited. * * * We think, therefore, that the granting of this application would be entirely ineffective to allow the petitioning corporation to disobey the provisions of this section, and that the court is given no authority to authorize it to continue to perform any act which this statute prohibits.”

Accordingly the petition was denied. It is true that the court added at the end of the opinion the statement that:

“It is quite clear that, so far as the business of this corporation is confined to the collection of claims without legal proceedings, it is not affected by this statute.”

[3] Finally, it is asserted that section 280 of the Penal Law is void, in so far as it seeks to prevent a corporation from practicing law in the courts of the United States and that, as the Wedgren claim was collected through the bankruptcy court, it was not a thing prohibited by the Penal Law. The statute not only prohibits a corporation from appearing as attorney in any court in this state, or before any judicial body, but prohibits it from rendering or furnishing legal service of any kind in actions or proceedings of any nature, and from in any other

It might as well be contended that, if there were no federal statutes punishing perjury committed in the federal courts, the perjury law of the state would be void in so far as it applied to perjury committed before a referee in bankruptcy sitting outside a federal building, but within the state. When the time comes, and Congress or the judicial power of the United States authorizes corporations to practice law in the federal courts, it will be time enough to consider this grave constitutional question. In the meantime, it will be assumed that the Legislature of the state, which creates corporations, has retained the power to prohibit its own creatures from doing acts that are deemed by the Legislature to be inimical to the public interest, contrary to public policy, and that statutes to this end will be enforced by the courts of this state. Furthermore, and decisive of the point as to who may practice in the bankruptcy courts, the General Orders in Bankruptcy provide (No. 4 [89 Fed. iv, 32 C. C. A. viii]):

“Proceedings in bankruptcy may be conducted by the bankrupt in person in his own behalf, or by a petitioning or opposing creditor; but a creditor will only be allowed to manage before the court his individual interest. Every party may appear and conduct the proceedings by attorney, who shall be an attorney or counselor authorized to practice in the Circuit or District Court. The name of the attorney or counselor, with his place of business, shall be entered upon the docket, with the date of the entry. All papers or proceedings offered by an attorney to be filed shall be endorsed as above required, and orders granted on motion shall contain the name of the party or attorney making the motion. Notices and orders which are not, by the act or by these general orders, required to be served on the party personally may be served upon his attorney.”

Rule 11 of the District Court of the United States for the Southern District of New York provides as follows:

“Admission to practice in this court may be granted, on motion of an attorney of this court, to any member of the bar of the state of New York, being of good character and professional repute.”

Rule 111 provides that any member of the United States bar shall be dropped from the bar of that court when he shall have been disbarred from the bar of the state of New York. The plaintiff in this case is a “creditor,” not a “bankrupt,” and even if the defendant were a “petitioning or opposing creditor” and could under the above rule represent a “bankrupt,” it could not represent a “creditor.”

Judgment affirmed, with costs. All concur.