OiiRALD C. MANN Ausms ai. TEXAR 

lWXX~XX.XX 

A’rr”ws,:X G4CSNCHAL. 

Hon. 0. P. Lockhart 

Chairman, Board of Insurance Commissioners 

Austin, Texas 

Dear Sir: Opinion No. O-3695 

He: Article 506&c, V.A.C.S., providing that the court shall 

appoint the statutory liquidator 

named by the Board of Insurance 

Commissioners as receiver of 

insolvent insurance corporations 

is not mandatory but merely directory. The statute is not 

retroactive. 

Your request for opinion has been received and carefully considered 

by this department. IJe quote from your request as follows: 

"Upon assuming my duties as Life Insurance Commissioner, I 

fin? that there are certain insurance companies in receivers5i.p that have not neen placed in the hands of the liquidator 

provided for in Article 5obbc, Revised Civil Statutes of 

Texas. The companies referred to were in receivership at 

the time of the enactment of Article 5068~2 and were permitted 

to continue in the hands of receivers theretofore appointed. 

"Please advise me if Article 5068c, Revised Civil Statutes of 

Texas does not require that all companies in receivership be 

placed in the hands of the liquidator designated by the Board 

of Insurance Commissioners, whether the companies were in 

receivership prior to the enactment of said Article or not." 

Article 5068~~ Vernon's Annotated Texas Civil Statutes, provides 

for the liquidation, rehabilitation, reorganieation and conservation of insurance companies. The act provides for the appointment of a liquidator by the Board of Insurance Commissioners. 

Section 2 of the statute declares: 

nbihenever under the law of this State a court of competent 

jurisdiction finds.that a receiver should take charge of the 

assets of an insurer:domiciled in this State, the liquidator 

designated by the Board of Insurance Commissioners as hereinafter provided for shall be such receiver. The liquidator 
. - 

. - 

:zon. 0. P. Lockhart, Page 2 O-3b95 

so appointed receiver shall forthwith take possession of 

the assets of such insurer and deal with the same in his 

own name as receiver or in the name of the insurer as the 

court may direct...." 

Section 3 or the statute declares: 

Whenever under the laws of this State, a receiver is to be 

appointed in delinquency proceedings for an insurer domiciliary 

in another State, a court of competent jurisdiction in this 

State shall, on the petition of the Board of Insurance Commissioners of this State, appoint the liquidator herein 

provided as ancillary receiver in this State of such insurer.." 

Article II, Section 1 of our State Constitution provides: 

"The powers of the Government of the State of Texas shall be 

divid~etinto three distinct departments, each of which shall 

ue confined to a separate body of magistracy, to-wit; Those 

which are Legislative to one; those which are Executive to 

another, and those which are Judicial to another; and no 

person, or collection of persons, being of one of these departments, shall exercise any power properly attached to 

either of the others, except in the instances herein expressly permitted." 

.Je quote from 9 Texas Jurisprudence, pp. 457 and 458, as follows: 

*The cower:-‘ which properly belong to one of the departments 

of goirornmeilt are not to be exerted or usurped by another 

department. The constitution (Art. 2, S 1) expressly declares: * . . ..and no person or collection of persons, being 

one of these departments shall exercise any power properly 

attached to either of the others, except in the instances 

herein expressly permitted.' This is a direct prohibition of 

the aleming of the departments...." 

A,;;;;% V, Section 1, of our State Constitution reads in part as 

: 

"The judicial power of this State shall be vested in one 

Supreme Court, in Courts of Civil Appeals, in District 

Courts, in County Courts, in Commissioners' Courts, in Courts 

of Justices of the Peace, and in such other Courts as may 

be provided by law...." 

We quote from 9 Texas Jurisprudence, pp. 454 and 455, as follows: 

"The constitution declares that the judicial power of the 

state shall be vested in the courts named in Section 1, 

Article 5, and in such other courts as may be provided by 
” 

:-fan. 0. P. Lockhart, Page 3 O-3695 

law. It was the object of the framers of the constitution 

to mark out a complete judicial system, defining generally 

the Frovince of each of the courts, by reference to the 

objects confided to the action of each, and the relation of 

eacn to the others. Such a system cannot be changed by 

action of the legislative department, except when the power 

to make A change is conferred by the constitution-itself. 

The le,gislacure may not confer judicial power upon any other 

agency of government than courts"..... 

\Je quote from 11 American Jurisprudence, pp. 904-S and 6, as 

follows: 

"As a rule no effort is made in a Constitution accurately to 

define the scope or nature of judicial powers. These matters 

are left to be determined in the light of the common law 

and the history of our institutions as they existed anterior 

to, and at the adoption of, the Constitution..."The judicial 

powers include the important function of preventing departmental encroachment, such as marking out the boundaries of each 

department and remedying the invasions by either of the 

territory of the other. The judicial power and-function extend to the question as to the true limits of maritime law 

and admiralty jurisdiction,...to the authoritv to select 

nersons whose services may oe required in judicial proceedinps 

or who~mav oe required to act as assistants tc the judges in 

the performance of their judicial functions....." 

TUnderscoring our3 

Is the appointment and selection of a person to act as receiver a 

judicial act? T!;e courts have held in the affirmative upon this 

question. ;le quote from the opinion of the Supreme Court of Indiana in the case of State of Indiana ex rel Hovey v. Noble, 4 L. 

R. A., pp. 101-111, as follows: 

"*The powers of government,' ordains our constitution, 'are 

divided into three~separate departments, the legislative, 

the executive, including the administrative, and the judicial; 

and no person charged with official duties under one of these 

departments shall exercise any of the functions of another, 

except as in this Constitution expressly provided.1 

*The words employed are clear and strongi There is more than 

a mere theoretical separation, or else words are powerless 

and Constitutions mere empty fulminations. The provisions 

of the Constitution we have quoted, taken in connection with 

those which prescribe , .define and limit the powers of the 

other departments of government, remove all doubt and make 

it uncontroverti'oly plain that the courts possess the entire 

body of the intrinsic judicial power of the state, and that 

the other departments are prohibited from assuming to exercise any part of that judicial power.;.. 
. . 

Hon. 0. P. Lockhart, Page 4 O-3695 

"One of the greatest of American Judges, Gibson, Ch. J., 

said: 'But the judicial power of the Commonwealth is its 

whole judicial power, and it is so distributed that the 

Legislature cannot exercise any part of it.' Greenough v. 

Greenough, 11 Pa. 189.... 

"'II there is any one proposition immutably established,' said 

Sawyer, J., '1 had supposed it to be that the judiciary deparsiilent is atisolutely independent of the other departments 

of government.' 

“A department without the power to select those to whom it 

must intrust part of its essential duties cannot be independent. lf it must accept as 'ministers and assistants,' as 

Lord Baron calls them, persons selected for them by another 

department, then it is dependent on the department which makes 

the selection. To be independent the power of the judiciary 

must be exclusive, and exclusive it cannot be if the Legislature may deprive it of the right to choose those with whom 

it shall share its labors or its confidences.... 

",,,..we affirm that where assistants are necessary to enable 

judges to discharge their duties as judges the court must 

choose those assistants. Since the time of Queen tilizabeth 

have appointed masters in chancery and master commissioners 

now are, and have always been, appointed by the courts. 

v;de suppose no one will deny that the courts from the earliest 

a,.:es of the law have?possessed tne power to appoint referees, 

receivers, cormnissiotiers and all other like ministers and 

assistants. and that they possessed this power because it was 

ultl;ciaQwer. If it was not a judicial power it could 

not have residt -~rdin the courts, for courts have no other -..- 

. [ilnoerscoring OUrSI 

"1:; is a mistake to assume that a court possesses merely the 

;>o,ler to hear and decide causes. The power is much more exeensive. 

%ouvier thus defines judicial power: 'Belonging to or emanating from a judge as such. The authority vested in a judge'.. 

"It is. however, unnecessarv to multiplv authorities: for it 

cannot be doubted that judicial power includes the authoritv 

to select persons whose services may be required in judicial 

uroceedin,zs, cr who mav be required to act as the SssistalltS 

cr the judues in the perfcrmance of their judicial functions, 

whether they be referees. receivers, attorneys, masters or 

commissioners." (Underscoring.ours) 
. - 

Hon. 0. P. Lockhart, Page 5 O-3695 

In the case of State of Texas vs. Teachers Annuity Life Insurance 

Company, 149 S.W. (2nd) 318! (Wril, of Error Refused), the State 

through its Attorney Genera instituted suit against an insurance 

corporation, alleging in its petition among other things that 

the company was hopelessly insolvent and its capital stock was 

ixpaireci 100%. The Attorney General requested the 6oard of Insurance Comr.iissioners to join in the suit but the Board refused. 

'Pt.2 insurance company moved for a dismissal of the cause in the 

trial court on the ground that the Attorney General had no authority to file the suit without the permission of the Board. The 

trial court sustained the company's motion and dismissed the 

cause. Tne Beaumont Court of Civil Appeals reversed the trial 

court and held that under the Constitution the Attorney General had 

the authority to institute and prosecute such suit, without the 

consent of the Board of Insurance Commissioners. &-it of tirror 

w?1s refused by the Supreme Court. Now in a case like the Teachers 

:lnnuity case, supra, would it be mandatory upon the trial court to 

appoint as receiver of said company the statutory liquidator of 

the Board of Insurance Commissioners, when the Board did not desire the appointment of a receiver and the liquidation of said 

company? Surely not. Would it be mandatory upon the court was 

not satisfied with the moral character or ability of the liquidator? We think not. Would the court be powerless to remove the 

liquidator as receiver if the court thought such removal was to 

the best interest of Che receivership? :Je think not. The selection and appointment of a person to act as receiver by the court 

is a judicial act involvinrl discretion on the part of the trial 

judge. The court would likely consider tnemoral character and 

aailitj- of the prospective receivers and appoint the person whom 

he ti-!ournt in his sound disrecticn would make the best 'receiver for 

all concerned. If the statute were a mandatory statute it would 

be unconsitutional in our opinion as an unlawful invasion upon 

the incependence of the judiciary. 

However it is a cardinal rule of construction that where a statute 

could be construed in two manners, one of which would make it 

merely~directory and constitutional, the other which would make 

it mandatory and unconstitutional, the rule of construction making 

the sixtutc directory and constitutional should be adopted. 

It is not within the power of the legislature to change the nature 

of a judicial function (the selection of a receiver) by mere1 

crea,ting another agency (the Board of Insurance Commissioners 'I 

to participate in its performance. See 95 A.L.R., p. 141'7. 

It is a well settled rule of statutory construction that laws are 

not to 'be construed retrospectively, or to have a retrospective 

effect, unless it shall clearly appear that it was so intended 

by the enacting body, and unless such construction is absolutely 

necessary to give meaning to the language used. The general rule 

is that statutes will be construed to operate prospectively only, 
Ron. 0. P. Lockhart, Page 6 O-3695 

i unless an intent to the contrary clearly ap ears. (See LewlsSutherland on Statutory Construction, Vol. !i I, pp. 1157 and 1158.) 

rle find no expression or clear intent in the statute that the 

Legislature desired that it should have any retrospective effect 

and we hold that the statute has no effect on receiverships 

which were pending prior to the enactment of the act. 

&z also hold that Articie 5068c, V.A.C.S. is not a mandatory 

statute but is merely a directory statute. Doubtless the courts 

will, in many instances, g ive this directory statute some consideration, but they are not compelled to appoint the statutory liquidator as receiver of insoivent insurance companies. 

lour question istherefore answered in the negative. 

APPROVED JUL 7, 1941 

GROVRR SRLLRRS 

FIRST ASSISTANT 

ATTORNEY GEiRRAL, 

WF:ff;ml 

Verv ~~. trulv ~.,d~~ vours 

AT'i'ORNEY GENERAL OF TEXAS 

BY Wm. J. Fanning 

Assistant