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Judd v. City Trust & Savings Bank

Supreme Court of Ohio
Dec 15, 1937
133 Ohio St. 81 (Ohio 1937)

Opinion

No. 26338

Decided December 15, 1937.

Practice of law — Inherent judicial power to regulate, control and define — Corporation cannot directly or indirectly practice law — Banks and trust companies — Unauthorized practice of law — Drafting wills, trust agreements, contracts or legal instruments for patrons — Trust company fiduciaries may act as legally qualified persons — Sections 710-159 and 710-160, General Code — Fiduciaries may draft papers incident to trust administration and appear in court, when — Privilege not license to render legal services for others.

1. In Ohio, the power to regulate, control and define the practice of law rests inherently in the judicial branch of the government.

2. A corporation cannot lawfully engage in the practice of law; nor can it do so indirectly through the employment of qualified lawyers.

3. The practice of law consists essentially of the performance of legal services for others. Banks and trust companies in Ohio are engaged in the unauthorized practice of law when, through their regular salaried officers and employees, who may be attorneys at law admitted to practice in Ohio, they prepare and draft wills, trust agreements, or contracts and other instruments requiring the exercise of legal skill, for their customers or patrons. And it makes no difference that such banks may be designated in such instruments in fiduciary capacities.

4. Sections 710-159 and 710-160, General Code of Ohio, expressly confer upon trust companies authorized to do business in Ohio the right to act in certain fiduciary capacities "under the same circumstances and in the same manner, and subject to the same control by the court having jurisdiction * * * as in the case of a legally qualified person." A fiduciary, whether an individual or a trust company, may exercise the privilege of completely executing the particular trust in all its details. Such trust companies may, therefore, through their regular attorney-employees, draft papers incident to the administration of the trusts in their hands, and appear in the Probate Court or other courts in matters pertaining to the execution of such trusts.

5. This privilege, however, does not operate as a license to render legal services for others. Such companies must adhere to the business of executing the trusts in their control; they have no right or authority through their attorney-employees to give independent legal advice to those beneficially interested, to perform legal services directly for them, or to advise or act for others claiming some interest in the trust estate, where such advice or acts would partake of a legal nature.

APPEAL from the Court of Appeals of Mahoning county.

This action in injunction was commenced in the Court of Common Pleas of Mahoning county by the plaintiffs, Wallace F. Judd, William A. Mason and Robert J. Nicholson, of the city of Youngstown, Ohio, duly admitted to the practice of law in all the courts of Ohio, on behalf of themselves and others, associated as members of the Mahoning County Bar Association, against the defendants, The City Trust Savings Bank, The Dollar Savings Trust Company and The Mahoning Savings Trust Company, Ohio corporations in the city of Youngstown, organized and existing for the purpose of conducting the business of banking and the administering of trusts.

The amended petition alleged that, contrary to the rights of plaintiffs and all other regularly licensed attorneys at law, and contrary to public policy and in violation of law, the defendant corporations through their regularly employed officers, some of whom are attorneys at law, are engaged in the practice of law "by drawing wills, trust agreements, and other legal documents, and by giving legal advice incident thereto, for other persons * * * by permitting, authorizing and/or directing their said agents to prepare drafts of wills, codicils, trust agreements and other legal documents for other persons in which said instruments said defendants are named as trustee, executor, administrator, guardian, agent, or in other fiduciary capacity, and to give legal advice incident thereto."

Plaintiffs prayed "that a permanent injunction be issued, enjoining and restraining defendants, and each of them, from practicing law as herein alleged, and for such other and further relief as may be just and equitable in the premises * * *."

Separate answers were filed by the three defendants, similar in form. In addition to general denials, each defendant pleaded that it was "qualified under the law to do a trust business in the state of Ohio, and is authorized to accept trusts and receive and hold property thereunder in a fiduciary capacity in accordance with the provisions of said law."

Further answering, each defendant alleged it employed "qualified attorneys at law to represent its interests, and from time to time permits, authorizes and directs said attorneys to draft wills, trust agreements and other fiduciary documents, in all of which documents, this defendant is either a party or is named as trustee, executor, administrator, guardian, agent, or in other fiduciary capacity and in all of which documents this defendant has a direct and substantial interest as such fiduciary."

The Court of Common Pleas found the issues joined by the pleadings in favor of the plaintiffs and decreed them the relief asked for in the amended petition.

Thereupon, on December 31, 1935, the cause was appealed to the Court of Appeals. On December 9, 1936, that court also decreed relief in favor of the plaintiffs, finding in its journal entry that the defendants maintain and have maintained trust departments in connection with their business, in charge of officers, employees and attorneys at law upon a full time salary basis; that defendants have held themselves out to the public as maintaining trust departments and have through attorney trust officers and others given legal advice to individuals and patrons in the preparation and drafting of wills, codicils, trust agreements, deeds and escrow agreements, and have also held themselves out to the public as qualified to appear in courts in handling estates and legal matters, including court procedure, incident to the administering of trusts, estates, etc.; that defendants have performed services for patrons and for the public by drafting wills, codicils, trust agreements, etc., and have by and through said officers and agents for and on behalf of their patrons appeared in the courts of Mahoning county, Ohio, in the administration of estates and trusts.

The court further found that in drafting such legal documents and in subsequently making court appearances in connection therewith, the defendants have had no direct or primary interest, although appointed fiduciaries in and by virtue of such instruments, and that the defendants have been engaged in the unlawful practice of law in the respects charged in the amended petition and as disclosed by the evidence.

The journal entry concludes:

"It is therefore ordered, adjudged and decreed that the defendants and each of them, their officers, agents and employees be and they are hereby perpetually enjoined from advertising, representing or holding out that they maintain a legal department for the purpose of giving legal advice or that they draft or will draft legal documents, for and on behalf of their patrons, or other persons, individuals, or corporations, and from drafting or preparing legal documents for persons, individuals or corporations, in which they have no direct or primary interest; and they are enjoined, together with their officers, agents and employees, from the practice of law for and on behalf of others in matters in which they have no direct or primary interest and they are, together with their officers, agents and employees, perpetually enjoined from the practice of law by appearing in court for and on behalf of others, whom they may represent or claim to represent in fiduciary capacities."

It is to be noted that the Court of Appeals extended its decree of injunction not only beyond the scope of relief asked by the plaintiffs in their amended petition, but beyond the scope of the decree entered by the Court of Common Pleas.

This cause is in the Supreme Court of Ohio by reason of the allowance of a motion to certify.

Mr. Wallace F. Judd, Mr. William A. Mason and Mr. Robert J. Nicholson, for appellees.

Messrs. McKain, Ohl Swanner, Messrs. Manchester, Ford, Bennett Powers and Messrs. Harrington, Huxley Smith, for appellants.


At the outset of this opinion, two general propositions must be conceded: (1) In Ohio, the power to regulate, control and define the practice of law reposes in the judicial branch of the government. 4 Ohio Jurisprudence, 423, Section 5; Land Title Abstract Trust Co. v. Dworken, 129 Ohio St. 23, 193 N.E. 650. And this is true elsewhere. See, In re Opinion of the Justices, 289 Mass. 607, 194 N.E. 313, and cases therein cited. (2) A corporation cannot lawfully engage in the practice of law; nor can it do so indirectly through the employment of qualified lawyers. Land Title Abstract Trust Co. v. Dworken, supra; Section 8623-3, General Code of Ohio; 4 Ohio Jurisprudence, 429, Section 12; 10 Ohio Jurisprudence, 888, Section 663; 5 American Jurisprudence, 276, Section 25.

In the disposition of this case upon the record there are two questions to be answered. They will be stated and discussed separately. The first is as follows:

Are state banks in Ohio, having trust powers, engaged in the unauthorized practice of law, when, through regularly employed and salaried officers and employees who are generally attorneys at law admitted to practice in Ohio, they prepare and draft wills, trust agreements and contracts for their customers and patrons, in which instruments the banks are named in fiduciary capacities?

The leading case in this state relating to the unauthorized practice of law is Land Title Abstract Trust Co. v. Dworken, supra. There, in the first paragraph of the syllabus, the following rule is announced:

"1. The practice of law is not limited to the conduct of cases in court. It embraces the preparation of pleadings and other papers incident to actions and special proceedings and the management of such actions and proceedings on behalf of clients before judges and courts, and in addition conveyancing, the 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."

The acts stressed in the above definition as constituting the practice of law are the performance of legal services for others. A corporation is "an artificial being, invisible, intangible, and existing only in contemplation of law." Trustees of Dartmouth College v. Woodward, 4 Wheat., 518, 4 L.Ed., 629, quoted in State, ex rel. Crabbe, Atty. Genl., v. Thistle Down Jockey Club, Inc., 114 Ohio St. 582, 590, 151 N.E. 709, 711. It can function only through its officers, agents or representatives. A salaried trust officer or employee of a bank or trust company, regularly employed, whether a member of the bar or not, is as much an integral and essential part of its organization as the president or cashier. Corporations may not practice law. Therefore, when a trust company through its attorney-employee performs services for customers or patrons in drafting wills, trust agreements, or contracts and other instruments requiring the exercise of legal skill, such corporation must be held to be practicing law within the quoted definition from the Dworken case. And this fact is not altered by the inclusion of the trust company in such instruments as a fiduciary.

There can be no doubt that the drawing of wills and trust agreements for others, especially as a confirmed occupation, constitutes the practice of law to an important degree. Their preparation requires a considerable knowledge of the law, and includes the imparting of legal advice to their creators. When a testamentary disposition of property is made by such instruments, they must, if unrevoked, be administered, and sometimes interpreted, by a court of proper jurisdiction.

Furthermore, when an attorney-employee of a trust company prepares legal documents of the character denoted for the patron or customer of the corporation, the latter is deprived of the offices of an independent legal counselor; patently the allegiance of the attorney-employee is to his employer. "The relation of attorney and client is that of master and servant in a limited and dignified sense, and it involves the highest trust and confidence. It cannot be delegated without consent, and it cannot exist between an attorney employed by 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 Re Co-operative Law Co., 198 N.Y. 479, 483, 92 N.E. 15, 16, 32 L.R.A. (N.S.), 55, 58, 139 Am. St. Rep., 839, 842, 19 Ann. Cas., 879, 881.

In recent years the question now engaging our attention has been before many of the courts of this country, in varying forms, and the holdings in most instances have been to the effect that the preparation of wills, trust agreements, and other instruments calling for the application of legal knowledge, by a bank or trust company for its customers or patrons, through its employees who may be qualified attorneys at law, constitutes the unauthorized practice of law. People, ex rel. Illinois State Bar Assn., v. Peoples Stock Yards State Bank, 344 Ill. 462, 176 N.E. 901; People v. Peoples Trust Co., 180 App. Div. 494,167 N.Y. Supp., 767; In re Eastern Idaho Loan Trust Co., 49 Idaho 280, 288 P. 157, 73 A. L. R., 1323; In re Otterness, 181 Minn. 254, 232 N.W. 318, 73 A. L. R., 1319; Cain, Pres., Bar Assn. of N.D., v. Merchants National Bank Trust Co. of Fargo, 66 N.D. 746, 268 N.W. 719. Compare, State, ex rel. Indianapolis Bar Assn., v. Fletcher Trust Co. (Ind.Sup.), 5 N.E.2d 538. And it would seem to make no difference that the bank or trust company is named as a fiduciary in such instruments. People, ex rel. Committee on Grievances of Colorado Bar Assn., v. Denver Clearing House Banks, 99 Colo. 50, 59 P.2d 468; State, ex rel. Miller, Circuit Atty., v. St. Louis Union Trust Co., 335 Mo., 845, 74 S.W.2d 348.

Both the reasoning and the results in the cases cited appeal to us in the main as sound, and we find ourselves in accord generally with their pronouncements.

It follows that the first question propounded calls for an affirmative answer, i. e., when state banks in Ohio, having trust powers, pursue the practices described for their customers and patrons, they are engaged in the unauthorized practice of law. Of course, this would preclude them from representing by advertisements or otherwise that they possess the privilege of engaging in such practices.

It should not be inferred from anything we have said that the attorney for a testator or settlor may not confer with the bank through its officers and attorneys on any matter of mutual interest having to do with the appointment of the bank as a fiduciary. Nor do we mean to say that the bank is precluded from stipulating the terms under which it is willing to undertake the execution of the trust.

The second question for decision is as follows:

When state, banks in Ohio, having trust powers, have been appointed fiduciaries and are acting as such, and have duly admitted attorneys at law in their regular employ on a salary basis, and those attorneys draft legal papers incident to the administration of the trusts and appear in the Probate Court and other courts for and on behalf of the banks as such fiduciaries, are the banks engaged in the unauthorized practice of law?

This question presents a more difficult and complex problem.

Sections 710-159 and 710-160, General Code of Ohio, expressly confer upon trust companies, authorized to do business in Ohio, the right to act in fiduciary capacities, including the roles of executor, administrator, trustee, agent and guardian of the estate, "under the same circumstances and in the same manner, and subject to the same control by the court having jurisdiction * * * as in the case of a legally qualified person." These statutes have existed in their present form since the year 1919, and so far as we are apprised their validity has never been challenged by court action, and is not challenged in the present case. Section 10506-1, General Code, a part of the Probate Code, includes corporations under a definition of the term "fiduciary."

Pursuant to this statutory authority, trust companies in Ohio have frequently been named and appointed as fiduciaries and have executed and are executing the duties entrusted to them in such capacities. Being corporations, the management of the affairs relating to the trusts in their hands must be, assumed by their officers and employees. Of necessity, a corporate fiduciary has to be regarded and treated much as a natural person filling the same position, and the statute so provides.

Executors, administrators, trustees and the like, are charged by law with non-delegable duties. 18 Ohio Jurisprudence, 243, Section 189; 40 Ohio Jurisprudence, 350, Section 131. Different sections of the Probate Code describe various acts which shall or may be performed by fiduciaries. For example, see Sections 10504-10, 10504-23, 10506-33, 10506-41, 10506-46, 10506-59, 10506-60, 10507-3, 10507-15, 10507-22, 10507-31, 10507-32, 10507-42, 10509-4, 10509-41, 10509-45, 10509-56, 10509-57, 10509-85, 10509-112, 10509-118 and 10509-121, General Code.

Quite often fiduciaries hold legal title to the estates in their control. Executors and administrators occupy the position of personal representatives of decedents, and are court officers, subject to control, discipline and removal for good cause. They must collect debts due an estate and sue the debtors if necessary. Fiduciaries are also liable for the return and payment of taxes upon personalty and realty, and the same statement applies as to inheritance and estate taxes. Sections 5336, 5343, 5343-2, 5345-3, 5345-4, 5345-5, 5680, 5684, 5685 and 10509-121, General Code; Title 31, Section 192, and Title 26, Section 420 et seq., U.S. Code. Other instances of equal importance could be mentioned.

Executors, administrators, trustees and other fiduciaries may be personally accountable for mismanagement, misconduct or neglect in connection with an estate in their charge. Morris v. Mull, 110 Ohio St. 623, 114 N.E. 436; Moeller v. Poland et al., Exrs., 80 Ohio St. 418, 89 N.E. 100; 18 Ohio Jurisprudence, 293, Section 235.

Since practicing law involves the performance of services for others, any individual is accorded the right to do his own legal work either in court or out. Upon such theory it would appear to have been generally recognized in Ohio that fiduciaries may act for themselves in the execution of their offices, in and out of court, if, being competent to do so, they care to assume that burden. Sections 10506-3 and 10509-193, General Code; 18 Ohio Jurisprudence, 431, Section 339; 40 Ohio Jurisprudence, 350, Section 131; Rockel's Complete Ohio Probate Practice (4 Ed.), 427, Section 508, et seq.; Adams Hosford, Ohio Probate Practice and Procedure (2 Ed.), observation on page 590, also page 655, subdivision 15. Strictly speaking, "executors and administrators are personally liable for the services of attorneys employed by them." Thomas, Admx., v. Moore, 52 Ohio St. 200, 39 N.E. 803.

While it is true that a fiduciary, whether a trust company or a natural person, is answerable to creditors, distributees, beneficiaries, heirs, cestuis que trustents, wards, and the like, in that the estate must be administered with due regard for their interests, that is not destructive of the proposition that the fiduciary has a very real, vital and substantial interest to conserve on his or its own account — a direct and primary interest, if you please. Responsibility for the proper execution of the trust rests solely on the fiduciary.

As previously noted, trust companies are empowered by law to act as fiduciaries. Such right is not disputed. In performing the legal phases of that business, attorney-employees are acting for their employers. They are engaged in an occupation directly connected with their employers' authorized undertaking. They are not acting for others, except as others may be incidentally affected. The trust company is then doing its own recognized business through lawyers of its own selection. Whether they are salaried employees within the organization, or outside lawyers receiving a fee for their services, is therefore not important in such a situation. See Hanson v. Federal Land Bank of Omaha, 63 S.D. 622, 628, 262 N.W. 228, 231; In re Kelsey, 186 App. Div. 95, 100, 173 N.Y. Supp., 860, 863, 37 N.Y. Cr. Rep., 299.

If those interested in an estate, such as beneficiaries or creditors, are dissatisfied with the manner in which the fiduciary is proceeding, they are at liberty to employ independent counsel of their own choice to protect their interests. A variety of statutory remedies is available to them.

Pursuing the discussion further, paragraph four of the syllabus in Land Title Abstract Trust Co. v. Dworken, supra, reads:

"4. The statutes of this state recognizing title guarantee and trust companies were enacted for the purpose of enabling such companies to guarantee titles to real estate, but not for the purpose of performing acts which constitute the practice of law. Section 9850, General Code, authorizing title guarantee and trust companies to prepare and furnish abstracts and certificates of title to real estate, does not permit such companies to issue a certificate containing an opinion as to the condition or validity of titles which are not guaranteed by such companies."

That statement, and the pertinent part of the opinion on which it is based, carries the unmistakable implication that services performed by such companies exclusively in the business of guaranteeing titles, even though they do touch upon the practice of law, should not be branded as illegal, being merely incidental to a sanctioned enterprise.

In other words, so long as title guarantee and trust companies confine their activities to performing services beneficial to themselves in the prosecution of their approved business, the necessarily appurtenant benefits of a legal complexion to other persons does not make such pursuit unlawful. See People v. Title Guarantee Trust Co., 227 N.Y. 366, 125 N.E. 666; People v. Title Guarantee Trust Co., 191 App. Div. 165, 181 N.Y. Supp., 52 (affirmed 230 N.Y. 578, 130 N.E. 901). Illustrating the thought expressed in a pertinent manner, we note the case of Rosenthal v. Lawyers County Trust Co., 156 Misc. 910, 911, 282 N. Y. Supp., 868, 869, where it is said:

"The ordinary business corporation cannot act as a trustee. Only corporations chartered as trust companies, and expressly authorized to act in such capacity, can serve as trustees. And in such cases, though some of the services required may invade the practice of law, if they are necessarily incident to the proper execution of the trust, they may be sanctioned. ( Land Title Abstract Trust Co. v. Dworken, 129 Ohio St. 23, 193 N.E. 650.) Reference should also be had to the New York citations specifically stressed in the opinion of the Ohio Supreme Court ( supra). But the seeming necessity for the sanction of such incidental special powers cannot be converted into a license for further corporate infringement upon the exclusive right of the individual to practice law, and no court is willing to invite further encroachments."

The attitude of the Supreme Court of Michigan is shown by its opinion in the case of Detroit Bar Assn. v. Union Guardian Trust Co., 282 Mich. 216, when it said:

"The statute (3 Comp. Laws, 1929, Sec. 12018) expressly confers upon such corporations [trust companies] the power to act generally as agents or attorneys in the management of estates, to serve as executors, administrators, trustees, receivers or assignees, or guardians under an appointment by court and other kindred powers. We have already stated herein that we are of the opinion this statute is not unconstitutional in granting such powers to these corporations notwithstanding they may be thereby authorized to engage in some types of business which are within or border closely upon certain phases of the practice of law as that term is considered in the decisions of various courts. * * *

"It would seem to be a necessary inference that the Legislature contemplated that such companies should thereby be authorized and empowered to present matters * * * which were ordinarily incident to the execution of their respective trusts to the courts in the same manner and to the same extent as might an individual serving in like capacity; and the Legislature must have intended to empower trust companies to carry on these activities as a part of their regular business. The conclusion is that the Legislature in passing the pertinent statutes must have contemplated that a trust company so authorized might perform, as a part of its regular established business, the ordinary and incidental services relative to a trust which it had assumed, provided that for the rendering of such services it made no charge other than that of the fees provided by statute."

Undoubtedly a trust company acting as a fiduciary must adhere to the business of executing the trust. It has no right or authority to give independent legal advice to those beneficially interested, to perform legal services directly for them, or to advise or act for others claiming some interest in the trust estate, where such advice or acts would partake of a legal nature.

We are therefore constrained to answer the second question asked in the negative.

Our attention has been directed to the cases of Bennie v. Triangle Ranch Co., 73 Colo. 586, 216 P. 718, and Mullin-Johnson Co. v. Penn Mutual Life Ins. Co. (D.C. Cal.), 9 F. Supp., 175, to which might be added Mortgage Commission of New York v. Great Neck Improvement Co., 162 Misc. 416, 295 N.Y. Supp., 107, in support of the tenet that a corporation cannot conduct its own cases in court by one of its officers. However, upon analysis, the holdings in those cases are confined to the proposition that an ordinary business corporation may not prosecute or defend a legal action in which it is directly concerned through an officer or agent who is not a duly admitted attorney at law.

It may also be appropriate to remark that upon its facts and in principle the instant case is distinguishable from those cases in which certain corporations and associations have been held to be engaged in the unauthorized practice of law by the employment of attorneys to represent the customers of or subscribers to such corporations or the members of such associations, in various legal matters. 73 A. L. R., annotation beginning at page 1332; 105 A. L. R., annotation beginning at page 1371; In re Shoe Mfgs. Protective Assn., Inc. (Mass.Sup.), 3 N.E.2d 746; Richmond Assn. of Credit Men, Inc., v. Bar Assn. of City of Richmond, 167 Va. 327, 189 S.E. 153; State, ex rel. Freebourn, Atty, Genl., v. Merchants' Credit Service, Inc. (Mont.Sup.), 66 P.2d 337; State, ex rel. McKittrick, Atty. Genl., v. C. S. Dudley Co., Inc. (Mo.Sup.), 102 S.W.2d 895.

In conclusion, this opinion is confined to deciding the precise issues presented by the record in this case, and should be so interpreted by the bench and bar. The question of the propriety of an attorney employed on a salary basis in sharing fees and compensation with others, not attorneys, is not before this court. In re Otterness, supra.

The judgment of the Court of Appeals is modified in conformity with this opinion, and as so modified will be affirmed.

Judgment modified and affirmed.

MATTHIAS, DAY, WILLIAMS, MYERS and GORMAN, JJ., concur.

WEYGANDT, C.J., concurs in propositions 1, 2 and 3 of the syllabus.


Summaries of

Judd v. City Trust & Savings Bank

Supreme Court of Ohio
Dec 15, 1937
133 Ohio St. 81 (Ohio 1937)
Case details for

Judd v. City Trust & Savings Bank

Case Details

Full title:JUDD ET AL., APPELLEES v. THE CITY TRUST SAVINGS BANK ET AL., APPELLANTS

Court:Supreme Court of Ohio

Date published: Dec 15, 1937

Citations

133 Ohio St. 81 (Ohio 1937)
12 N.E.2d 288

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