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New Jersey State Bar Association v. Northern New Jersey Mortgage Associates

Decided: May 23, 1960.

NEW JERSEY STATE BAR ASSOCIATION, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF-APPELLANT AND CROSS-RESPONDENT,
v.
NORTHERN NEW JERSEY MORTGAGE ASSOCIATES, A NEW JERSEY CORPORATION, ET AL., DEFENDANTS-RESPONDENTS AND CROSS-APPELLANTS, AND LAWYERS MORTGAGE AND TITLE COMPANY, A NEW YORK CORPORATION, ETC., DEFENDANT-RESPONDENT



No. 98: For reversal -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For affirmance -- None. No. 99: For affirmance -- Chief Justice Weintraub, and Justices Burling, Jacobs, Francis, Proctor, Hall and Schettino. For reversal -- None. The opinion of the court was delivered by Jacobs, J.

Jacobs

The plaintiff New Jersey State Bar Association and the defendants Northern New Jersey Mortgage Associates and Northern New Jersey Abstract Company appealed to the Appellate Division from portions of the judgment entered in the Chancery Division pursuant to Judge Scherer's opinion, reported at 55 N.J. Super. 230. We certified their appeals on our own motion while they were pending in the Appellate Division.

In 1955 the State Bar Association (and five individual plaintiffs) sought to enjoin the Mortgage Associates and the Abstract Company from engaging in conduct which allegedly constituted the unauthorized practice of the law. The Chancery Division entered summary judgment in favor of the Mortgage Associates and the Abstract Company but, on appeal, this court directed that there be a plenary hearing in the Chancery Division as to the State Bar Association's complaint. See 22 N.J. 184 (1956). Thereafter additional testimony was taken and disclosed that on November 1, 1956, the assets of the Mortgage Associates and the Abstract Company were sold to the Lawyers Mortgage and Title Company, a New York corporation which continued operations at the same premises (133 Cedar Lane, Teaneck) with substantially the same personnel. The Abstract Company was dissolved as of December 24, 1956, and the Mortgage Associates was dissolved as of November 3, 1957. The State Bar Association was granted leave, on March 5, 1957, to join the Title Company as a party defendant and in due course it filed an amended or supplemental complaint seeking injunctive relief and alleging that, since its purchase of the assets of the Mortgage Associates and the Abstract Company, the Title Company had engaged in conduct which

constituted the unauthorized practice of the law. In its answer the Title Company asserted that it had purchased the physical assets of the Mortgage Associates and the Abstract Company and was engaged in the business of "searching, insuring titles, loaning money on mortgages and in performing legitimate services in connection therewith" but it denied that it engaged in any conduct which constituted the unauthorized practice of the law.

In a pretrial order dated January 30, 1958 the Title Company set forth that its activities fell into three general classifications, namely, (1) the making of mortgage loans directly by the Title Company as mortgagee, (2) the placing of mortgages for other institutions such as banks and organizations which loan money on mortgages and the insuring of title in connection with such loans and (3) the insuring of lands of corporations and individuals, the causing of searches to be made and the servicing of the mortgages. Under the first classification the Title Company stated that it "customarily draws the bond and mortgage necessary for the purpose of making the loan"; it denied that it draws "deeds, affidavits of title by the seller or resolutions." Under the second classification the Title Company stated that it places mortgages and insures titles incident thereto and "at the request of the mortgagee draws the title instruments except such as at times are prepared by the mortgagee or its attorneys." Under the third classification the Title Company stated that it "causes searches to be made and makes abstracts and services mortgages and insures titles and makes a commensurate charge therefor." In his opinion in the Chancery Division, Judge Scherer noted that the Title Company employs attorneys on a salary basis to "read titles, examine abstracts submitted by others, prepare closing papers and close titles"; he noted that it also employed a non-lawyer who "closed construction mortgage payments involving tract construction, but did not close the permanent mortgage loans to individual home buyers." See 55 N.J. Super., at page 239. [32 NJ Page 435] The Title Company acknowledged that, in addition to forms of bonds and mortgages, it maintained at its offices, supplies of forms of other instruments including deeds, corporate resolutions, satisfactions and releases of mortgages, estoppel certificates and affidavits; it stated that these forms were kept merely for the convenience of the bar generally, but there was testimony indicating that it prepared affidavits of title and other instruments such as satisfactions and releases of mortgages, in addition to bonds and mortgages; it denied that it prepared deeds but there was testimony indicating that occasionally deeds had been prepared by its employees as a matter of courtesy; it denied that it undertook to resolve any title problems although there was testimony indicating that where there were objections to title it would attempt "to clear them" -- one of its employees testified that "if it is a minor objection that can be cleared up by a telephone call or a letter, otherwise we sent a report of the title to the broker or the person representing the seller and secure whatever proof necessary to clear it"; and it denied that it made any charges for services in connection with its preparation of the bonds and mortgages and other instruments but there was testimony indicating that in addition to separate charges for the "mortgage title policy" and specific items such as surveys and recording fees, the buyers paid fees for "search and title abstracting" -- these fees for "search and title abstracting" were generally in a fixed sum of $200 or $225 and exceeded by far the cost to the Title Company of the search and abstract. Passing mention may be made of the fact that the Title Company oftentimes received an additional "1% flat fee" which imposed on the buyer a substantial charge above the principal of his mortgage and the stated interest thereon. See Transcripts of Hearings before the New Jersey Legislature's Joint Commission to Study and Investigate Certain Allegedly Unfair Practices in Connection with the Making of Loans Secured by Mortgages on Residential Properties

-- created by Assembly Concurrent Resolution No. 30 (1957) and reconstituted under ACR 1 (1958).

Judge Scherer concluded that the proof did "not preponderate" in favor of the plaintiff's contention that the Title Company was practicing law. He declined to grant injunctive relief and dismissed the plaintiff's amended or supplemental complaint against the Title Company with the proviso that the Title Company "shall no longer employ a non-lawyer to handle the tract construction loan payments." See 55 N.J. Super., at page 248. He also dismissed the complaint against the Mortgage Associates and the Abstract Company but directed that costs be taxed against them. The plaintiff's appeal is from the dismissal of the amended or supplemental complaint against the Title Company and the appeal of the Mortgage Associates and the Abstract Company is from the taxation of costs against them. The plaintiff did not appeal from the dismissal of the complaint against the Mortgage Associates and the Abstract Company and the Title Company did not appeal from the provision in the Chancery Division's judgment which directed that it shall no longer employ a non-lawyer to handle its tract construction loan payments.

In this court's earlier opinion (22 N.J. 184), Chief Justice Vanderbilt set forth the pertinent principles to which we fully subscribe and which represent the law of the case. As he pointed out, the privilege of engaging in the practice of the law is strictly confined to individual attorneys who have been duly licensed upon proper showings of character and competency and who are at all times subject to rigid rules of conduct. These restrictions are designed to serve the public interest by protecting "the unwary and the ignorant from injury at the hands of persons unskilled or unlearned in the law." See 22 N.J., at page 195. The Constitution of 1947 vests in this court exclusive jurisdiction over the admission to the practice of law (art. 6, ยง 2, par. 3; 22 N.J., at page 198) and while the Legislature may adopt a statute which penalizes the unlawful practice of the law (N.J.S.

2 A:170-78) it may not constitutionally authorize the practice of the law by anyone not duly admitted to the bar by this court. See 22 N.J., at page 198; cf. In re Baker, 8 N.J. 321, 336 (1951). A corporation may not be admitted to the bar and may not engage in conduct which amounts to the practice of the law "even as an incident to its lawful business." See 22 N.J., at page 197.

It is, of course, clear that the practice of law is not confined to litigation but extends to legal activities in many non-litigious fields which entail specialized knowledge and ability. See Unger v. Landlords' Management Corp., 114 N.J. Eq. 68, 71 (Ch. 1933); People ex rel. Illinois State Bar Ass'n v. Schafer, 404 Ill. 45, 87 N.E. 2 d 773, 776 (Sup. Ct. 1949). Oftentimes the line between such activities and permissible business and professional activities by non-lawyers is indistinct. See Auerbacher v. Wood, 139 N.J. Eq. 599 (Ch. 1947), affirmed 142 N.J. Eq. 484 (E. & A. 1948). In the Auerbacher case Justice Heher noted that what constitutes the practice of law does not lend itself "to precise and all-inclusive definition" and that some fields may "in some areas" properly overlap the law (142 N.J. Eq., at page 485); and in Gardner v. Conway, 234 Minn. 468, 48 N.W. 2 d 788, 797 (Sup. Ct. 1951), Justice Matson noted that each individual set of circumstances must be passed upon "in a common-sense way which will protect primarily the interest of the public and not hamper or burden that interest with impractical and technical restrictions which have no reasonable justification." See also 55 N.J. Super., at page 246. Courts have sometimes sought to distinguish between simple and complex legal work but this distinction appears to lack any real force. See People v. Title ...


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