131 A.2d 646 | Conn. Super. Ct. | 1957
In these two suits the plaintiffs seek to restrain the defendants, hereinafter referred to as the banks, from engaging in certain acts and practices which they claim constitute the illegal practice of law. The plaintiffs also seek a declaratory judgment as to whether or not these acts and practices constitute the unlawful practice of law and violations of §§ 7638 and 7641 of the General Statutes. The two suits will be treated together in this memorandum.
It should be borne in mind throughout 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., (dis.)
Paragraphs 6 to 21 of the complaints allege certain acts and practices of the banks as the basis for the plaintiffs' claim that they are illegally practicing law. These allegations of fact are virtually admitted by exhibit A and the answers to the amended motions for disclosure, exhibits B-1 and B-2, with certain qualifications not important to this decision.
From the evidence, including these exhibits, I find the following facts: *251
1. The defendants, by advertising and by distribution of literature, disseminate and give out, without charge, to their customers and prospective customers and the public, general information concerning (a) the application, scope and effect of various laws that are involved in estate planning, including federal income and gift tax laws, federal and state estate and succession tax laws, laws relating to trusts, and laws relating to the administration and disposition of decedents' estates; (b) the complexities of federal and state taxes and various means of minimizing liability for them; (c) the advantages and disadvantages of various means provided by law for the distribution of property, including the use of inter-vivos and testamentary trusts. The foregoing information is given out for the purpose of inducing people to name the banks as executors or trustees in wills or trust agreements. In some of the advertising and literature, an individual is told to consult his attorney on his specific situation and is informed that all wills and trust agreements must be drawn by such attorney.
2. The banks, through conferences with and occasional correspondence by officers of their trust departments, who sometimes are and sometimes are not attorneys, discuss with customers and prospective customers the matters enumerated in 1(a)-(c), supra, for the purpose of inducing them to name the banks as executors or trustees in wills or trust agreements. The banks in so doing do not seek to give final advice as to what any individual should do, and urge the customers and prospective customers to consult their own attorneys on their specific situations. The banks do not take any compensation for such conferences and correspondence.
3. The banks, through their trust officers, who sometimes are and sometimes are not attorneys, review, at the request of testators or trustors, the *252 provisions of their wills and trust agreements, which have been drawn by outside counsel, in instances where the banks are named executors or trustees, or the testator or trustor has indicated that he is considering naming the banks to such a position, and advise them or their attorneys of necessary, proper or desirable changes. In all such cases, the trust officers urge the testators and trustors to consult their own attorneys, and any further instruments which may result from such review are drawn by such attorneys, not employees of the banks. The banks do not take any compensation for such reviews.
4. Probate of wills: The banks followed the practice in 1956 of preparing and filing application for the probate of wills where they were named as executors and of being represented at probate hearings by employees who sometimes were and sometimes were not attorneys, unless the banks considered that an uncertain or unclear legal issue was involved or that a controversy might arise. In this event they were represented by independent outside counsel employed by them as fiduciaries.
5. Hearings in Probate Court: During 1956 the banks followed the same practice in being represented at such hearings and proceedings in furtherance of their fiduciary administrations as is indicated in the preceding paragraph concerning the probate of wills, paragraph 4, supra.
6. Application for widow's allowances: The same practice was followed as is indicated in paragraph 4, supra.
7. Applications for the compromise of claims for or against the banks as fiduciary of estates of decedents or wards or trust estates: The same practice was followed as is indicated in paragraph 4, supra. *253
8. Claims of the banks themselves against the banks as fiduciaries: These were prepared and filed by employees of the banks with the banks as fiduciaries, and applications for approval of these claims were prepared and filed in the Probate Court in the manner indicated in paragraph 4, supra.
9. Accounts and returns of distribution: These were prepared and filed in the Probate Court, and the banks were represented at hearings for their approval in the same manner as indicated in paragraph 4, supra, regardless of whether any other party in interest was represented by outside counsel.
10. Preparing and filing federal tax returns and dealing with examiners of the internal revenue service, and preparing and filing state tax returns and dealing with agents of the state tax department in connection with admitting, denying or compromising liability for taxes claimed to be due the banks as fiduciaries: The same practice was followed as indicated in paragraph 4, supra. Here an additional requirement was made for employing independent outside counsel — that the amount in question warrants such employment.
11. Compromising claims of federal and state tax authorities against the banks as fiduciaries of decedents' and wards' or trust estates: The banks did this in the manner indicated in paragraph 4, supra, with the additional requirement stated in paragraph 10, supra.
The defendant Connecticut Bank and Trust Company in case No. 107312 served as fiduciary in 1956 in 1841 fiduciary administrations. In 16 of these, the bank retained independent outside counsel to compose or approve all the papers filed in the Probate Court and to appear and represent it at probate hearings and proceedings. In 450 (excluding the 16 mentioned above), it retained independent *254 outside counsel to render some legal services, but this number seems to have included services rendered long prior to 1956 in estates which were active in 1956. In case No. 107313, Hartford National Bank and Trust Company, defendant, the corresponding figures are 1517, 28 and 511. Out of these 1517 accounts, 284 were estates of decedents. In 71.8 per cent of these accounts (estates of decedents), independent outside counsel were used, most of whom were employed in real estate matters. Of the balance of the accounts, 1233, which were for trusts, guardianships, conservatorships, etc., the percentage where the bank employed lawyers was 27.2, but as above noted, this figure included lawyers employed prior to 1956 in trusts still active.
There were some further refinements in the testimony on this subject which need not be detailed here.
There are a great many legal problems, some of them of a complex nature, which arise in fiduciary administrations of estates of decedents. The following are illustrative: In the application of a will for probate, the questions of domicil and who are the heirs at law; in the inventory and appraisal of the estate, the problems of valuation of interests such as leasehold estates and remainder interests, what dividends and accrued interest are included, to whom the household furniture belongs; return of claims — which ones are properly presented and entitled to priority; the report to the state on transfers other than by will or laws of intestacy (Form E3, exhibit D) requires important legal determinations including concessions and nonconcessions of taxability of the items involved; determination of what are allowable deductions in the succession tax, and computation of tax; federal estate tax returns contain nineteen schedules, each of which has its legal problems, such as schedules of jointly owned property, *255 of marital deductions, transfers prior to death; preliminary and final accounts present legal problems; the distributions of estates present problems such as interest, payments in kind or in cash.
There is a considerable body of case law built up around the succession and transfer tax statutes of this state. Trust officers have frequent meetings with tax attorneys representing the state to compromise claims arising out of these laws. The questions which arise are more difficult to solve than title searching problems. At these conferences, it is seldom that independent outside counsel are present. Where the claim is contested in the Probate Court, however, during 1956 the banks have consistently been represented by outside independent counsel. On questions of taxability, it is a common thing for the trust officer to make decisions without consulting an attorney.
The defendant bank in case No. 107312 employs 200 in its trust department, six of whom are attorneys; in case No. 107313 the bank employs 200, of whom seven are attorneys.
In estate planning, the banks do not render specific advice as to what terms should be put in a will or trust. They tell the prospective customer that he must obtain an attorney to do this. The banks avoid so far as possible giving definite answers to legal questions such as descent and distribution, intestacy, etc. The object is to have the customer employ his own attorney to draw his will.
The charges made by the banks in fiduciary administrations are in accordance with a fixed schedule which has been in effect in this county for some time and is recognized by the Probate Court. There is no greater or additional charge when work is done by a lawyer-employee of the banks. *256
It will be noted from the above that the banks no longer draw wills and trust agreements for customers and prospective customers, but insist that these services be performed by outside independent counsel employed by the customer. There is thus removed from this case a practice which has been repeatedly disapproved by the courts. Judd v. CityTrust Savings Bank,
The relevant portions of the statutes applicable to the case may be summarized as follows:
Section 7638 provides for the admission of attorneys by the Superior Court and that no other person than an attorney so admitted shall practice law or plead at the bar of any court of this state, except in his own cause. The substance of this section goes back in the laws of Connecticut to its colonial legislation. The words "practice law or" were added to the section in 1933 (Cum. Sup. 1935, § 1627c), but otherwise its very text has been in the General Statutes since 1875. Rev. 1875, p. 44, § 29.
Section 7641 provides that no person who has not been admitted as an attorney shall practice law or appear as an attorney at law for another, in any court of record in this state, or make it a business to practice law, or appear as an attorney for another in any such court, or make it a business to solicit employment for a lawyer, or hold himself out to the public as being entitled to practice law, or assume to be an attorney or counselor at law. There are penalties imposed for the violation of this section, the person who violates it is deemed in contempt of court, and the Superior Court is given jurisdiction to restrain a violation. This statute was enacted in 1927. Public Acts 1927, c. 159. In 1933 the words italicized were added. It is obvious that the purpose of the 1933 amendment was to forbid the performance *257
of any acts by persons not attorneys, in or out of court, commonly understood to be the practice of law. Grievance Committee v. Payne,
The defendant Connecticut Bank and Trust Company has certain express powers as set forth in General Statutes, § 5781, as amended by § 2648d of the 1955 Cumulative Supplement, the relevant powers being to act as guardian or conservator of the estate of any person, and to sell or mortgage any real estate held as such fiduciary; to act as trustee, receiver, executor, or administrator, and as such sell or mortgage any real estate held as such fiduciary. The grant of these powers was first made in 1913 and there has been no substantial change since then. Public Acts 1913, c. 194, § 8. There were legislative declarations of like power for banks and trust companies incorporated in special acts prior to 1913.
The defendant Hartford National Bank and Trust Company, a duly organized national banking association, and duly permitted by the federal reserve board so to do, may exercise one or more of the foregoing fiduciary offices, but under like terms and limitations as rule state banks. Hamilton v. State,
There have been at least six cases decided by appellate courts involving the legality of practices of bank-fiduciaries: Detroit Bar Assn. v. UnionGuardian Trust Co.,
These cases are thoroughly analyzed in the exhaustive and scholarly briefs of the plaintiffs and of the defendants. Most of the questions presented here have been involved in one or more of these cases, they are in conflict in certain respects, and the construction placed upon them by counsel for the respective parties in the instant cases differs. It is unnecessary to review these cases here. They will be cited from time to time in support of the principles which this court believes should be adopted in Connecticut.
A corporation cannot lawfully engage in the practice of law, nor can it do so indirectly through the employment of qualified attorneys. Judd v. CityTrust Savings Bank,
At the outset, it is held that the criterion of whether the banks are engaged in the practice of law is not, and cannot be, the employment of outside independent counsel, as distinguished from the use of salaried employee attorneys. There can be no distinction between acts performed by the banks through their salaried attorneys and the same acts performed through outside counsel retained by the banks in a specific situation. In either case the attorney is employed by the bank and is acting for it. Both the permanently salaried lawyers of the bank and its occasionally retained counsel represent of necessity primarily the bank. Salaried attorneys and outside counsel are subject to like obligations to the bar and to the public. This view is supported by the majority opinion in Merrick v. American Security Trust Co.,
The primary question before the court is whether the acts of the banks do in fact constitute the practice of law. It would be difficult, if not impossible, to make an all-inclusive definition of the term "practice of law." Grievance Committee v. Payne,
The distinction between acts performed by an individual or corporation incidental to his or its own authorized business and those performed for others is pointed up in the Merrick case, supra, 274, 275, by the citation of a number of illustrative adjudicated cases. Thus, an unlicensed individual may not engage in the business of negotiating the settlement of personal injury or workmen's compensation claims, a corporation may not engage in the business of contracting to furnish, by an attorney, legal advice and consultation on all business, personal and private matters, or advertise that it will bring dispossess actions up to the point of suit; a bank may not, through lawyers it employs, transact legal business for its customers; a trust company may not engage in the business of drawing wills and trust agreements; a corporation may not make a business of collecting claims owned by others, determining whether and when to sue, etc. On the other hand, a real estate broker may prepare deeds and mortgages, so long as the papers grow out of and are intimately connected with his business transactions; the Missouri Supreme Court has distinguished between casualty insurance companies which settle claims made by third persons against their insureds and companies which hold themselves out to the public as being in the business of settling claims; LibertyMutual Ins. Co. v. Jones,
This distinction is emphasized in Bump v. Barnett,
Countless other examples could be cited of everyday legal transactions properly carried on by an individual or corporation whom they concern without the assistance of an attorney. No one would dispute a building contractor's drawing his own contracts without the assistance of a lawyer, an industrial concern's entering into collective bargaining agreements with a union without a lawyer, an insurance company's selling insurance policies, which are contracts, with no assistance from lawyers. An individual may, of course, appear in court pro se and conduct his own case. The very statutes invoked by the plaintiffs make this distinction: "[N]o other person than an attorney, so admitted, shall practice law or plead at the bar of any court of the state,except in his own cause." § 7638. "No person who has not been admitted as an attorney . . . shall practice law or appear as an attorney . . . for another, in any court of record in this state . . . ." § 7641. (Italics supplied.)
Since to constitute the practice of law, the acts must be performed on behalf of another, the vital *262 question for determination in the instant cases is whether the acts performed by the banks and summarized above are performed for themselves, as incidental to their duties as fiduciaries, or, on the other hand, from their very nature are performed on behalf of others.
Executors, administrators, trustees and the like are charged with nondelegable duties. For example, an executor must exhibit the will for probate, § 6962; a fiduciary must prepare and file an inventory of the estate; Cum. Sup. 1955, § 2932d; a conservator must prepare and file an inventory and manage the estate; § 6878; and a guardian must do likewise; §§ 6854, 6860. Banks as executors and administrators have numerous statutory duties in connection with succession taxes. They are personally liable not only for federal estate taxes but also for all other federal taxes, if other debts are paid before such taxes. 31 U.S.C. § 192. They are liable as individuals for the payment of post-mortem claims arising out of the operation of a decedent's business.Hewitt v. Sanborn,
It is argued by the plaintiffs that fiduciaries, in the administration of estates, are acting not for themselves but for the estate, for the creditors and beneficiaries. An estate is not a legal entity. It is neither a natural nor artificial person, but is merely a name to indicate the sum total of the assets and liabilities of a decedent or incompetent. Estate of Bright v. *263 Western Air Lines,
It is hard to conceive how a bank or trust company could exercise any of the powers given it by state and federal statute if it could not engage in the acts and practices enumerated above. It cannot be an executor without probating wills, filing inventories, accounts and distributions, handling tax matters and *264
the like. It cannot be an adequate estate manager without giving advice on the management of estates, and the chief opportunity to do so is just before the drafting of the estate instrument. Merrick v. AmericanSecurity Trust Co.,
The case of Grievance Committee v. Payne,
It follows that the banks, in performing the acts enumerated above, are acting primarily for themselves in the proper exercise of their functions as fiduciaries under the state and federal statutes cited, and are not engaged in the practice of law, except in the one respect which will now be discussed.
The practice of the banks in permitting, in some instances, lay employees to represent them in probate proceedings and hearings is improper. Such representation should always be by an attorney, either a salaried employee attorney or outside counsel as the bank may elect in the particular situation. While an individual may appear in the courts in proper person, a corporation, because of the very fact of its being a corporation, can appear only by *265
attorney, regardless of whether it is interested in its own corporate capacity or in a fiduciary capacity.Detroit Bar Assn. v. Union Guardian Trust Co.,
supra, 219. The decisions of other states are in accord with this principle, as admitted in the defendants' brief. Bennie v. Triangle Ranch Co.,
The defendants invoke General Statutes § 7794 and the case of Union v. Crawford,
The power to regulate, control and define the practice of law reposes in the judicial department.Grievance Committee v. Payne,
In conclusion, the banks' activities set forth in the facts found, supra,
In preparing and filing in the Probate Courts various applications, petitions, accounts, inventories and distributions pertaining to estates and trusts, conservatorships and guardianships, the banks are performing the ordinary and incidental services relative to trusts assumed by them under the statutes authorizing them to act as fiduciaries. DetroitBar Assn. v. Union Guardian Trust Co.,
The banks should appear in proceedings and hearings in the Probate Courts only by attorney, who may be a salaried employee or outside independent counsel. Detroit Bar Assn. v. Union Guardian TrustCo.,
The work of preparing and filing tax returns, dealing with state and federal tax authorities and appearing in proceedings before them may properly be done by regular employees of the banks, either lawyers or laymen. Merrick v. American Security Trust Co., supra, 278; Groninger v. Fletcher TrustCo., supra, 206.
The practice of the banks in carrying on all these activities through lay or lawyer employees except as noted does not conflict with the public interest and does not constitute the illegal practice of law or a violation of statute.
Judgment may enter for the defendants in each case on the claim for an injunction from engaging in the acts and practices of the defendants as found by the court, except that an injunction may issue against each defendant, under penalty of $10,000, restraining it from appearing and being represented in proceedings and hearings in the Probate Courts by lay employees.
On the second claim for relief, a declaratory judgment may enter that none of the acts and practices of the defendants as found by the court, either singly or in combination, constitute the unlawful practice of law or a violation of §§ 7638 and 7641 of the General Statutes, except that their appearing and being represented in proceedings and hearings in the Probate Courts by lay employees does constitute the illegal practice of law and a violation of these statutes.