Summary
In Cohn v. Thompson (1932) 128 Cal.App.Supp. 783, 788, 16 P.2d 364, the appellate department of the superior court stated: “In the case now before us... we find that the plaintiff was not practicing law within the meaning of the foregoing definition.
Summary of this case from Fink v. ShemtovOpinion
Docket No. 1491.
November 25, 1932.
APPEAL from a judgment of the Municipal Court of the City of Los Angeles. James H. Pope, Judge. Affirmed.
The facts are stated in the opinion of the court.
(2 Cal. Supp. 44.)
Marion P. Betty and Porter C. Blackburn for Appellant.
Samuel C. Cohn for Respondent.
Saul S. Klein and Kimball Fletcher, as Amici Curiae.
This is an appeal on the judgment-roll alone. The complaint was in two counts, an open book account and account stated, and alleged that prior to the commencement of the action Bullock and Jones, for a valuable consideration, assigned to plaintiff all their right, title and interest to said claim, and that plaintiff is now the owner and holder thereof. Judgment was awarded to the plaintiff against defendant Howard Glover Thompson, who presents this appeal.
Findings were made that the following allegations in the amendment to the answer were true: "II. That the said David W. Cohn is not an attorney-at-law, and is not admitted to practice law in the state of California. IV. That the said claim described in the said complaint against the defendants was assigned by Bullock and Jones, a corporation, to plaintiff herein, and that under and by virtue of the contract of assignment of said account by Bullock and Jones, a corporation, to the plaintiff, David W. Cohn, it was contracted and agreed by and between the said plaintiff and the said Bullock and Jones, in consideration of said assignment, that the plaintiff would endeavor to collect the account described in the complaint from the defendant at plaintiff's expense, if possible, and if successful would receive a certain percentage of the amount collected, contingent upon collection thereof, but in the event that the said account could not be collected from the defendant without suit, then in that event plaintiff would sue in his (plaintiff's) own name, and hire an attorney at his own expense to bring said suit and prosecute same to judgment, and if successful, and a collection was made, plaintiff was to deduct the costs and a certain percentage of the account collected from the amount collected for his services, and then remit the balance due to plaintiff's assignors, Bullock and Jones. That by the terms of said contract the plaintiff was to retain and pay said attorney at his own expense for said services and to pay all costs likewise. V. That pursuant to said contract the plaintiff did hire and retain as his attorney one George M. Wicke, attorney of record for the plaintiff herein, and did have said attorney institute the above-entitled action in plaintiff's name, and did appear in court by his attorney of record, George M. Wicke, and attempt to attain [obtain] a judgment in the above-entitled action against the said defendant above named; that said attorney, George M. Wicke, is the attorney for the plaintiff, David W. Cohn, and that the relation of attorney and client does not exist between plaintiff's assignors, Bullock and Jones, a corporation, and the said George M. Wicke."
Appellant urges that the contract is illegal and void because it was made for the purpose of collection only, and to thus enable plaintiff to make a profit from the practice of law; that the contract provided that the plaintiff would pay all expenses and would collect the said account and receive, as compensation therefor, a certain percentage of the amount collected, and if a suit was filed by the plaintiff, that he should receive a certain percentage of the amount collected, and that the plaintiff's counsel, George M. Wicke, the attorney for the said plaintiff, would be paid entirely by the said plaintiff. That the relation of attorney and client did not exist between Bullock and Jones, the plaintiff's assignor, and the said George M. Wicke, attorney for the plaintiff. The defendant further maintains that the plaintiff is not the real party in interest and has no interest in the claim more than any attorney who sues on a claim for collection on a contingency basis, the whole purpose and intent of the assignment being to enable the plaintiff to sell the legal services of his attorney, and make a profit thereon. The defendant contends that said contract is void as against public policy, that by this means plaintiff is not under the jurisdiction of The State Bar of California, and is not under The State Bar's rules of conduct and thereby restrained from soliciting lawsuits, and if allowed to hire an attorney and maintain this action in his own name, his attorney will be thus soliciting indirectly.
It is contended in the brief of amicus curiae that the findings sufficiently show that plaintiff is engaged in the unlawful practice of the law; that said contract of assignment is illegal and void as it is in derogation of the express provisions of the law, against public policy and tends to aid or abet an unlicensed person to practice law or to receive compensation therefrom.
It is conceded by amicus curiae that under the laws of California an assignment of a chose in action for collection is valid; that a collection agency, or business, when promoted strictly as a collection agency, is a lawful business authorized by law (chap. 485, Stats. 1927, p. 822, and amendments thereafter) and that a prosecution of an action by an assignee for collection does not, of itself, constitute the practice of the law.
[1] In construing the code provision requiring every action to be prosecuted in the name of the real party in interest, our courts have followed the rule that whoever holds the legal title to a demand is the real party in interest, and may sue thereon in his own name. (3 Cal. Jur., p. 296.) It is well settled that an assignment for collection, without any consideration being paid by the assignee, vests the legal title in the assignee, which is sufficient to enable him to recover, although the assignor retains an equitable interest in the thing assigned. ( Morrison v. Veach, 190 Cal. 507 [ 213 P. 945]; Ralph v. Anderson, 187 Cal. 45 [ 200 P. 940]; Woodward v. Brown, 119 Cal. 283 [51 P. 2, 542, 63 Am. St. Rep. 108]; Hopkins v. Contra Costa County, 106 Cal. 566 [39 P. 933]; Greig v. Riordan, 99 Cal. 316 [33 P. 913]; Grant v. Heverin, 77 Cal. 263 [118 P. 647, 119 P. 493]; Kelley v. Hampton, 22 Cal.App. 68 [ 133 P. 339]; Ingle Mfg. Co. v. Scales, 36 Cal.App. 410 [ 172 P. 169].)
[2] Does an assignee for collection who holds the legal title to a claim and possesses the right to sue thereon and to employ attorneys to represent him, engage in the practice of law where, under and by virtue of the contract of assignment and in consideration thereof, the assignee agrees, in the event that the claim cannot be collected without suit, to sue in his own name and hire an attorney at his own expense to prosecute the suit, and if the collection is made, after deducting the costs and a certain percentage for his services, the assignee agrees to remit the balance to his assignor? No case has been cited, nor, after thorough search, have we been able to find any case which holds that a collection agency is practicing law under such circumstances. Appellant relies upon the cases which hold that a corporation contracting with its clients to employ attorneys as agents to furnish them with legal services is engaged in the practice of law, and a corporation can neither practice law nor hire lawyers to carry on the business of practicing law for it. ( People v. California Protective Corp., 76 Cal.App. 355 [ 244 P. 1089]; People v. Merchants Protective Corp., 189 Cal. 531 [ 209 P. 363]; see, also, notes, 73 A.L.R. 1327; 32 L.R.A. (N.S.) 55; Ann. Cas. 1918C, p. 131.) Here we find no such contract. The assignee merely contracts to file suit in his own name, if necessary to make the collection. But he does not agree to furnish any legal services whatever to the assignor. The assignee employs the attorney and controls his action. No legal services are performed for the assignor. The only duty of the assignee is to account to the assignor after the collection has been made. In making the agreement to bring suit the assignee merely agrees to do that which he can legally do without any agreement, by virtue of the assignment. Provided the assignment is absolute, so as to vest the apparent legal title in the assignee, the latter is entitled to sue in his own name, whatever collateral arrangements have been made between him and the assignor respecting the proceeds. ( Ralph v. Anderson, supra.) [3] Practice of law is the doing or performing services in a court of justice, in any matter pending therein, throughout its various stages, and in conformity to the adopted rules of procedure. But in a larger sense it includes 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 pending in a court. ( Smallberg v. State Bar, 212 Cal. 113, 119 [ 297 P. 916]; State Bar v. Superior Court, 207 Cal. 323, 335 [ 278 P. 432]; People v. Merchants Protective Corp., supra; People v. California Protective Corp., supra.) In the case now before us for consideration we find that the plaintiff was not practicing law within the meaning of the foregoing definition. Certainly the plaintiff did not agree to furnish to his assignor legal advice or counsel, nor to prepare legal instruments or contracts. Neither did the plaintiff agree to do or perform services in a court of justice for the assignor or to employ an attorney to perform such services for the assignor. The services performed by the attorney were for the assignee alone, who was the real party in interest and exercised entire control of the action, the assignor having no power to exercise any control whatsoever either over the action or the attorney in the performance of his services.
Our conclusion that the plaintiff was not engaged in the practice of law is fortified by a decision made by the Court of Appeal since the submission of this case. A hearing was denied by the Supreme Court. In that case, Schroeder v. Wheeler, 126 Cal.App. 367 [ 14 P.2d 903], the plaintiff, a patent attorney, had agreed to perform, as in this case, certain services which he was capable of performing, and in addition thereto agreed to furnish the services of an attorney at law, if said services should be beneficial and necessary, for which the defendant agreed to pay on a contingent basis. The court said:
"A consideration of the entire contract forces the irresistible conclusion that, as contended by plaintiff, the intention of the parties was that plaintiff should perform the necessary services as a patent attorney and act as defendant's agent and counselor in looking after her patent and trade-mark matters generally, employing counsel if and when necessary.
"The question thus arises as to the legality and the enforceability of such a contract. That is, can a person who is not an attorney at law enforce a contract under which he agreed to, if necessary, employ the services of an attorney at law to assist in the performance of services, a portion of which services is to be and may be performed by such person?
"As hereinbefore stated, it is conceded by both parties that one who is not an attorney at law not only cannot practice law, but cannot recover compensation for legal services by him performed, but there is no law prohibiting persons other than attorneys from recovering the reasonable value of their services when performed at the request of another. ( Miller v. Ballerino, 135 Cal. 566 [ 67 P. 1046, 68 P. 600].) In 6 Corpus Juris, page 721, it is stated as follows: `An unlicensed person may recover for services not performed in a court of record, and of a character the performance of which would not constitute the practice of law.' (See cases therein cited.)
"Where, as here shown, by solemn contract in writing admitted to have been entered into by and between parties under the terms of which plaintiff agreed to perform certain services which he was capable of performing and further agreed to furnish the services of an attorney at law if said services should be beneficial and necessary and for and in consideration of which defendant agreed to pay plaintiff on a contingent basis, it cannot be held that the contract is illegal and void, neither is it unenforceable nor impossible of performance."
[4] Appellant urges that the contract is against public policy, and in support of his contention cites section 161 of the Penal Code, which forbids an attorney from buying any evidence of debt or thing in action, with intent to bring suit thereon. There is no such provision in the code as to collection agencies. The courts have commented on the fact that such contracts are in general use. In Koeppel v. Morrison, 84 Cal.App. 137, 140 [ 257 P. 590, 591), the court said: "It is common knowledge that collection agencies pursue the policy of taking assignments of claims for the purpose of bringing action, and that the only interest the assignee has in the subject-matter is a percentage thereof as his compensation for doing those things ordinarily performed by an attorney at law." Chapter 485, Statutes of 1927, page 822, declares the public policy as to such contracts by recognizing the right of collection agencies to do business, including "obtaining in any manner the payment of a claim". This provision is broad enough to include bringing a suit. The right of a collection agent to take an assignment of a claim and bring suit thereon in his own name has been so long recognized in this state, both by statute and decisions, that we cannot declare an assignment of a claim for the purpose of bringing suit to be against public policy. We find no merit in the contention that assignment of a claim with the intent that the assignee shall bring suit thereon is illegal and void. We have no power to make legislation. If legislation be desired forbidding collection agents, as well as attorneys, from buying claims with intent to bring suit thereon, arguments in support of such legislation must be addressed to the legislature.
The judgment is affirmed, with costs of appeal to respondent.
I concur in the opinion of Judge McLucas, but I think the record discloses an additional reason for affirming the judgment. [5] This appeal being presented on the judgment-roll only, the findings are conclusive upon us as to the facts. One of those findings is that the claim sued on "was assigned" to the plaintiff. This imports a completed assignment (including, if it was in writing, the signature and delivery of the writing), by which the title to the claim assigned passed to the plaintiff. (3 Cal. Jur. 233, 234; Burkett v. Doty, 176 Cal. 89, 92 [ 167 P. 518]; Curtin v. Kowalsky, 145 Cal. 431, 434, 435 [ 78 P. 962].) The remainder of this finding states that by the contract of assignment plaintiff agreed to do certain things. [6] Conceding, for the purpose of argument, that this agreement was illegal, yet it amounts to nothing more than the consideration for which the assignment was made. A completed assignment is an executed contract, to which the rule regarding illegality of consideration does not apply. ( Burkett v. Doty, supra; Curtin v. Kowalsky, supra; Ripperdan v. Weldy, 149 Cal. 667, 676 [ 87 P. 276].) It is no less effective as a transfer of title because made without consideration, or for an illegal consideration, or voidable for any other reason. Hence, the plaintiff was, by the assignment, vested with title to the claim and could maintain an action upon it. One who obtains property for an illegal consideration does not become an outlaw, nor is the property forfeited to anyone who can gain possession of it. (See Wayman Inv. Co. v. Wessinger, 13 Cal.App. 108, 110 [ 108 P. 1022]; California etc. Assn. v. Stelling, 141 Cal. 713, 720 [ 75 P. 320].) As against all except him from whom he obtained the property such a person is the owner of it and may resort to the courts to protect it, or, if it be a chose in action, to enforce it. His rights against the person from whom he obtained the property are not here in question, but would doubtless be determined on a consideration of the question whether both parties were in pari delicto.
I concur. I am not able to agree that a contract by which one obligates himself to hire an attorney to prosecute an action for the collection of a debt due another, if more peaceful methods fail, is not a contract to furnish legal services just because an assignment of the debt, solely for collection, intervenes. (See Elam v. Arzaga, 122 Cal.App. 742 [ 10 P.2d 805].) I am of the opinion, however, that accepting the agreement as one to furnish legal services does not require the conclusion that it is invalid and unenforceable for that reason.
It is neither unlawful nor contrary to public policy in view of extant statutes. "Fundamentally it pertains to the law-making power to declare what contracts are against public policy." ( County of San Bernardino v. Creamery Co., 103 Cal.App. 367, 373 [ 284 P. 457, 459], quoting from 6 Cal. Jur. 109; see, also, Maryland Casualty Co. v. Fidelity etc. Co., 71 Cal.App. 492, 497 [ 236 P. 210].) The legislation which seems to me to deny the existence of a public policy contravened by the agreement in question, is embodied in the act defining and regulating collection agencies. (Stats. 1927, p. 822, referred to in the main opinion.) The practice of collection agencies in taking assignments of the claims entrusted to them for the purpose of bringing actions thereon is "common knowledge". ( Koepple v. Morrison, 84 Cal.App. 137 [ 257 P. 590].) The act respecting collection agencies was adopted, in the light of this common knowledge, at the same session of the legislature which incorporated The State Bar and made it a misdemeanor for anyone not an active member of the bar to practice law. Both acts have received attention at the hands of the legislature at each session subsequent to their passage. The overlapping of the collection agency field with that of the practice of law is recognized by the requirement of a license for an attorney engaged in the collection agency business, but exempting him from the provisions of the Collection Agency Act if his services are those rendered to clients in the usual course of professional practice. In the premises I find neither the statutory law nor public policy forbidding an agreement whereby one who makes it a business to collect claims engages to make the collection by suit if necessary. I agree with the remark in the majority opinion that if there is to be a change in the law it must come from the legislature.