OiiRALDC. 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 Commissionersas receiver of insolvent insurancecorporations is not mandatorybut merely directory. The statute isnot retroactive.
Your request for opinionhas been received and carefully considered by this department. IJe quote from your request as follows: "Upon assuming my duties as Life InsuranceCommissioner, I fin? that there are certain insurance companiesin receivers5i.pthat 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 receivershipat the time of the enactment of Article 5068~2 and were permitted to continue in the hands of receivers theretoforeappointed.
"Please advise me if Article 5068c, Revised Civil Statutes of Texas does not require that all companies in receivershipbe placed in the hands of the liquidator designatedby the Board of Insurance Commissioners,whether the companieswere in receivership prior to the enactment of saidArticle or not." Article 5068~~Vernon's Annotated Texas Civil Statutes,provides for the liquidation, rehabilitation, reorganieationand conservation of insurance companies. The act provides for the appointment of a liquidator by the Board of Insurance Commissioners. Section 2 of the statutedeclares: 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 Commissionersas hereinafter provided for shall be such receiver. Theliquidator. -

. -

: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 insureras the courtmay direct...." Section 3 or the statutedeclares: Whenever under the laws of this State, a receiver is to be appointed in delinquencyproceedings 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 liquidatorherein provided as ancillary receiver in this State of such insurer.." Article II, Section 1 of our State Constitutionprovides:
"Thepowers of the Government of the State of Texas shall be divid~eti

nto 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 collectionof persons, being of one of these departments, shall exercise any power properlyattached 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: *
....andno person or collection of persons, being one of thesedepartments shall exercise any power properly attached to either of the others, except in the instances herein expresslypermitted.' This is a directprohibition of the aleming of the departments...." A,;;;;%V, Section 1, of our State Constitutionreads in part as

: "The judicialpower 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 constitutiondeclares that the judicialpower of the state shallbe 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. Itwas the object of the framers of the constitution to mark out a complete judicial system,defining generally the Frovinceof 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 changedby action of the legislative department, exceptwhen thepower to make A change is conferred by theconstitution-itself. The le,gislacure

may not confer judicialpower upon any other agency of government than courts"..... \Jequote from 11 American Jurisprudence, pp. 904-S and 6, as follows:
"As a ruleno effort is made in a Constitution accurately to define the scope or nature of judicialpowers. Thesematters 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 ofpreventing departmental encroachment, such as marking out the boundaries of each departmentand remedying the invasions by either of the territoryof the other. The judicialpower and-function extend to the question as to the true limits of maritime law and admiralty jurisdiction,...to the authoritv to select nersonswhose servicesmay oe required in judicialproceedinps or who~mav oe required to act as assistants tc the judges in the performance of their judicial functions....." TUnderscoring our3
Is the appointmentand selection of a person to act as receivera judicial act? T!;ecourts 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:
"*Thepowers of government,' ordains our constitution, 'are divided into three~separate departments, the legislative, the executive, including the administrative, and the judicial; and no person chargedwith official duties under one of these departments shall exercise any of the functions of another, except as inthis Constitution expressly provided.1
*Thewords employed are clear and strongi There ismore than a mere theoretical separation, or elsewords are powerless and Constitutionsmere empty fulminations. The provisions of the Constitutionwe have quoted, taken in connectionwith thosewhich prescribe, .define and limit the powers of the other departments of government, remove all doubt and make it uncontroverti'oly plain that the courtspossess the entire body of the intrinsic judicial power of the state,and that the otherdepartments 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: 'Butthe judicial power of the Commonwealth is its whole judicialpower, 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 immutablyestablished,' said Sawyer, J., '1had supposed it to be that the judiciary deparsiilent

is atisolutely

independent of the other departments of government.'

“ A departmentwithout the power to select those to whom it must intrustpart of its essential duties cannot be independent. lf it must accept as 'ministersand assistants,' as Lord Baron calls them, persons selected for them by another department, then it is dependent on the departmentwhich makes the selection. To be independent the power of the judiciary must be exclusive,and exclusive it cannotbe if the Legislature may deprive it of the right to choose those with whom it shall share its labors or its confidences.... ",,,..weaffirm thatwhere assistants are necessary to enable judges to discharge their duties as judges the courtmust choose those assistants. Since the time of Queen tilizabeth have appointedmasters in chancery and master commissioners now are, and have always been, appointed by the courts. v;de suppose no onewill deny that the courts from the earliest a,.:es of the law have?possessed tne power to appoint referees, receivers, cormnissiotiers and all other likeministers and assistants.and that they possessed thispower because it was ultl;ciaQwer. If it was not a judicialpower it could

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

-..-

. [ilnoerscoring

OUrSI
"1:;is a mistake to assume that a court possessesmerely the ;>o,ler to hear and decide causes. The power is much more exeensive. %ouvier thus defines judicial power: 'Belongingto or emanating froma 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 selectpersons whose servicesmay be required in judicial uroceedin,zs,

cr who mav be required toact 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. TeachersAnnuity 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 itspetitionamong other things that the companywas hopelessly insolventand its capital stock was ixpaireci

100%. The Attorney General requested the 6oard of Insurance Comr.iissioners to join in the suitbut the Board refused. 'Pt.2 insurance companymoved for a dismissalof the cause in the trial court on the ground that the Attorney General had no authority to file the suit without the permissionof the Board. The trial court sustained the company'smotion and dismissed the cause. Tne Beaumont Court of Civil Appeals reversed the trial court and held that under the Constitution theAttorney General had the authority to instituteand prosecute suchsuit, without the consent of the Board of InsuranceCommissioners. &-it of tirror w?1srefused by the Supreme Court. Now in a case like the Teachers :lnnuitycase, supra,would itbe 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 theappointment of a receiverand the liquidationof said company? Surely not. Would it be mandatoryupon the court was not satisfiedwith the moral character or ability of the liquidator? We think not. Would the court be powerless to remove the liquidatoras receiver if the court thought such removalwas to the best interest of Che receivership? :Jethink not. The selection and appointment of a person to act as receiver by the court is a judicial act involvinrl discretion on thepart of the trial judge. The court would likely consider tnemoral character and aailitj-of the prospective receiversand appoint the personwhom he ti-!ournt

in his sound disrecticnwould make the best 'receiverfor all concerned. If the statutewere a mandatory statute it would be unconsitutional in our opinion as an unlawful invasionupon the incependence of the judiciary.
However it is a cardinal rule of constructionthat where a statute could be construed in two manners, one of which would make it merely~directoryand constitutional,the otherwhich would make itmandatory and unconstitutional,the rule of constructionmaking the sixtutcdirectory and constitutional shouldbe adopted.
It isnot within the power of the legislatureto change thenature of a judicial function (the selectionof a receiver)by mere1 crea,ting

another agency (theBoard of InsuranceCommissioners'I toparticipate in itsperformance. See 95 A.L.R., p. 141'7.
It is a well settled rule of statutory constructionthat laws are not to 'be

construed retrospectively,or to have a retrospective effect, unless it shall clearlyappear that itwas so intended by the enacting body, and unless such construction is absolutely necessary to give meaning to the languageused. The general rule is that statuteswill be construed to operateprospectively only,Ron. 0. P. Lockhart,Page 6 O-3695

i unless an intent to the contrary clearly ap ears. (SeeLewlsSutherland on Statutory Construction,Vol. !i I, pp. 1157 and 1158.) rlefind no expression or clear intent in the statute that the Legislature desired that it should have any retrospective effect and we hold that the statutehas no effect on receiverships which were pendingprior 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, give 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 vours ~~. ~.,d~~ AT'i'ORNEY

GENERAL OF TEXAS

BY Wm. J. Fanning

Assistant