Debt Collector's Mechanic's Lien Practice Constitutes Unauthorized Practice of Law in Construction Industry Collections
The Houston Court of Appeals affirmed a permanent injunction against Ray Crain and Credit Management Consulting Company, holding that their preparation and filing of mechanic's liens and lien affidavits on behalf of construction industry clients constituted unauthorized practice of law. The court rejected Crain's argument that Property Code § 53.054 authorized non-attorneys to prepare lien affidavits, finding that such preparation impliedly advised clients of their legal rights and involved use of legal skill and knowledge.
Background
Ray Crain, a non-attorney, operated Credit Management Consulting Company (CMCC), a debt collection business focused substantially on construction industry debts. CMCC's business model centered on preparing, signing, and filing lien affidavits on behalf of laborers and materialmen to perfect mechanic's liens against real property. Crain personally prepared and signed notice letters on behalf of CMCC's clients, transmitted notices and affidavits to parties, and filed or caused to be filed the affidavits in county real property records.
Procedural History and the UPLC's Action
The Unauthorized Practice of Law Committee (UPLC), a nine-member body appointed by the Texas Supreme Court to investigate and prosecute unauthorized legal practice, had previously investigated Crain and CMCC in 1983 without taking action. In 1995, following a second investigation, the UPLC filed suit seeking to enjoin Crain and CMCC from continuing their business practices. The 61st District Court of Harris County granted summary judgment for the UPLC, permanently enjoining defendants from engaging in activities constituting the practice of law, including preparing legal instruments affecting real property. Crain and CMCC appealed, arguing that their activities did not constitute legal practice and that laches barred the UPLC's action due to the 1983 investigation.
The Court's Analysis
The Court of Appeals affirmed, holding that preparation and filing of mechanic's liens constituted unauthorized practice of law as a matter of law. Chief Justice Schneider's opinion emphasized that the practice of law embraces, in general, all advice to clients and all action taken for them in matters connected with the law. The court found that in preparing lien documents, CMCC
impliedly advised its clients of their legal rights and entitlement under the lawand that settling claims secured by liens
involved use of legal skill and knowledge.
The court rejected Crain's statutory defense under Property Code § 53.054, which permits lien affidavits to be signed by "another person on claimant's behalf." The court distinguished between signing an affidavit and preparing the legal instrument itself. While the statute authorized a non-attorney to sign an affidavit on behalf of a claimant, it did not authorize the preparation of such legal documents, which constitutes the practice of law. The court noted that the statute pertained to instances where the affiant no longer owned the claim because it was assigned to someone else.
On the laches defense, the court held the doctrine inapplicable because the UPLC was performing a governmental function when it brought suit against defendants. The court further held that Jeff Lehmann, chairman of the UPLC subcommittee, was entitled to governmental immunity from Crain's tortious interference counterclaim based on letters Lehmann sent to CMCC clients during the investigation.