Court Opinion

ID: 5143099
Source: CourtListenerOpinion
Date Created: 2022-01-01 20:34:05.607042+00
Date Added: 2024-06-11T08:24:37.128219
License: Public Domain

CALVERT, Justice.
I respectfully dissent from the holding that the order under attack in this case is void. I believe the order is a perfectly valid order. And if, as the majority have held, Sec. 12(b) of Art. 21.28, Texas Insurance Code, vests in the State Board of Insurance exclusive power and authority to fix the compensation of attorneys employed to represent the receiver in insurance liquidations, then I believe the statute to that extent contravenes Section 1 of Article II of the Constitution of Texas, Vernon’s Ann.St.,1 and is itself void.
The order under attack in this case does not occupy the same status as the order this day held void in Cause No. A-6901, State Board of Insurance v. Betts, Tex., 315 S.W.2d 279. I have agreed to the holding in that case. Moreover, I am satisfied that our recent decision in Cause No. A-6540, State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, supports our holding in Cause No. A-6901, but I am equally satisfied that it does not support the majority view in this case. On the contrary, that decision and the decisions from other state jurisdictions on which we there relied seem to me to compel a holding that the order under attack in this case is not void.
We should not mistake the true question which we are to decide in this case. It is not whether, in our opinion, the salary schedule set by the State Board of Insurance is more reasonable than that set by the District Judge. It is not whether, in our opinion, these receivership proceedings could be more expeditiously and economically administered by the State Board of Insurance than by the District Court. The question is this: to which governmental agency, the State Board of Insurance or the District Court, do the Constitution and laws of this state confide final jurisdiction and power to control the administration of the receivership assets?
The majority hold that sec. 12(b) of Art. 21.28 confides that final power and jurisdiction to the State Board of Insurance, and that the statute imposes on the court a mandatory duty to approve whatever action the Board may take with respect to fixing the compensation of the liquidator, deputy liquidators, counsel, clerks, and assistants. It is only by so holding that the majority are able to declare the order involved in this proceeding void. Wholly aside from the fact that the holding is directly contrary to what we said in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, it will hardly stand examination and analysis as I shall undertake to demonstrate.
It is my position that Art. 21.28 should be considered and interpreted as a whole in the light of the basic and fundamental law of this state, and that when that is done the provisions of sec. 12(b) which purport to empower the Board to fix salaries should be held to be directory only.
Article 21.28 does not provide for a purely administrative liquidation of insolvent insurance companies. The Legislature may have so intended as an amicus curiae suggests, but it did not so provide. Extensive supervision and control of liquidations is vested in the courts by the very terms of that Article. Many of the statutory provisions conferring judicial control are *292noted in our opinion in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 852, and they need not be noted in detail here. It is enoug'h to note those which in my judgment give validity to the order increasing the compensation of attorneys.
A receivership proceeding against an insurance company may only be commenced in a cottri (sec. 1(b)), and only a court may determine the necessity for the appointment of a receiver. Sec. 2(a). The court may on its own motion and at any time during a proceeding, issue such orders “as may be deemed necessary to prevent interference with the receiver or the proceeding, or waste of the assets of the insurer.” Sec. 4(b). Upon taking possession of the assets it is the duty of the receiver to take steps to liquidate them “subject to the direction of the court.” Sec. 2(e). These provisions, standing alone, would seem sufficient to authorize the order under attack in this case. But if that be not so, authority to make it is put beyond question by the opening sentence of sec. 2(b) where it is provided that “the property and assets of such insurer shall he in the custody of the court as of the date of the commencement of such delinquency proceedings.”
Far from removing the assets of insolvent insurance companies which are in receivership from control of the courts, the Legislature has thus committed the assets .of such companies to the custody of the courts. Such assets are in custodia legis. The powers of the government of the State of Texas over them lie with the judicial branch of the government, and under the provisions of sec. 1 of Article II of the Constitution “no person, or collection of persons” of the Legislative or Executive branches of the government may exercise any of the powers attached to the courts.
The compensation paid the three attorneys is not paid from any fund over which either the Legislative or Executive branches of the government has control. The compensation is not paid from a state fund, either general or special. Even if assets of these companies were in a state fund, subject to legislative control, they could not be made available for payment of compensation for personal services without an appropriation by the Legislature which has not here been made. But they are not in a state fund, and the Legislature could not have appropriated them to a specific state use even had it tried. The Legislature itself recognized this basic limitation on its own power when it provided in sec. 12(b) for final approval by the courts of all expenditures from receivership funds or assets.
In passing on the power of a court to appoint an attorney in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 853, we used this language:
“If, in the discharge of the duties of supervision placed upon him by statute, the District Judge decides that other or additional counsel are essential to the proper administration of a pending receivership case, such decision, while it may be subj ect to correction in other proceedings, may not be held void in a mandamus action in the absence of a clear showing of unreasonable, capricious and arbitrary action.”
The same section of Art. 21.28 which provides for the setting of salaries by the Board uses the same mandatory language in providing for the appointment of counsel by the Board. It is not suggested that the court in this case has acted unreasonably, capriciously or arbitrarily in adding to the compensation of the three attorneys. As a matter of fact, as the majority opinion discloses, the compensation of two of the attorneys as set by the court is within the limits of the Board's own budget and the third exceeds the budget figure only slightly. Are we not now in position of holding that while the court may not encourage and reward hard work and long hours by those already employed to the extent of an expenditure of $1,800 per year, it may add another attorney at a cost to the receivership of from $7,000 to $10,000 per year?
*293How far are we prepared to go in holding that sec. 12(b) imposes on courts a mandatory duty to approve, without question, all salaries set by the Board? Having held that the court cannot increase the compensation of attorneys to a figure it regards as fair and reasonable, must we not then hold that the court cannot reduce the compensation below the Board’s figure, even if the court regards it as too great an encroachment on receivership assets or out of line with services performed? And what of other types of expenses? Section 12(b) also provides that the court shall approve all reports of expenses properly authenticated and filed by the liquidator-receiver, unless objection is filed within ten days. Does that mean that the court itself may not, on its own motion, authorize other expenditures it regards as proper in the preservation of the assets of the receivership ? Does the use of the mandatory words “shall approve” mean that the court is without power, in the absence of objection, to audit such accounts and eliminate items it regards as improper or wasteful of assets?
There is no more mandatory language in Art. 21.28 than that which has been quoted above from sec. 2(b). It says that the property and assets of an insolvent insurance company “shall be in the custody of the court.” Having thus placed the assets in the custody of the courts and charged the courts with the final responsibility of administering and preserving them, has the Legislature then denuded the courts of the final power to carry out the responsibility by making the orders of the courts subject to the veto power of an administrative agency? I think not. May it do so? I think not.
We cited and quoted with approval from the case of In re Casualty Co. of America, 244 N.Y. 433, 155 N.E. 735, as authority for our decision in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846. The majority cite it again in their opinion in this case but now seek to distinguish it. The distinction is hardly valid. It is true that the New York court had before it only the narrow question of the power of the trial court to revise upward the allowed compensation of an attorney whose services had been engaged by the Superintendent of Insurance without an agreement in advance as to the compensation to be paid. But in deciding that question the court found it necessary to determine the much broader question of the respective powers of the statutory liquidator and the supervising court.
.The governing provision of the New York statute was in much the same language as sec. 12(b) of Art. 21.28. It provided [244 N.Y. 443, 155 N.E. 736]:
“‘For the purposes of this section,the superintendent shall have power to appoint, under his hand and official seal, one or more special deputy superintendents of insurance, as his agent or agents, and to employ such counsel, clerks and assistants as may by him be deemed necessary, and give each of such persons such powers to assist him as he may consider wise. The compensation of such special deputy superintendents, counsel, clerks and assistants, and all expenses of taking possession of and conducting the business of liquidating any such corporation shall be fixed by the superintendent, subject to the approval of the court, and shall, on' certificate of the superintendent, be paid out of the funds or assets of such corporation.’ ”
In interpreting the statute to delineate the respective powers of the superintendent and the trial court, the Court of Appeals in an able opinion by Chief Justice Cardozo said:
“The liquidator may find it convenient in the administration of the business to hire deptities or clerks or counsel at an agreed rate of compensation, or to attain a like result, when agreement has been omitted in advance of the approval of a bill or *294the settlement of an account, the approval or the settlement being ineffective without the creditor’s assent. He may find it convenient, when incurring other expenses, to follow the same course. He has authority under the statute to do this if he will. The statute is notice to him however, and to any one who deals with him, that the agreement, whatever its form, is of merely provisional validity. He may fix the rate of compensation as a trustee or an assignee for creditors or a receiver may be said to fix it (Cf.L. 1903, c. 336 § 9), but subject at all times to the approval of the cowt. The meaning is that even when he acts, the court shall have a veto. * * * [155 N.E. 736.]
* * * * * *
“Argument is made that what the liquidator does in fixing the value of a service, if not exempt altogether from review by the courts, must be held to be exempt unless power and discretion have been flagrantly abused. When he is merely wrong, the court is helpless, but when he is very wrong indeed, its authority is restored. There can be no basis for this distinction unless it be in the assumption that the superintendent is an arbitrator whose award is not impeachable for error in the determination of the merits, but impeachable only for mistake appearing upon the face thereof, or for fraud, or abdication of duty equivalent to fraud. (Cases cited.) But an arbitrator he is not, as we have already sought to show. * * * Terms more distinct than any to be found in this enactment must stamp him a judge before the courts will be shorn of the power of supervision that would otherwise be theirs.” 155 N.E. 736, 737.
The majority, as indicated, seek to distinguish the foregoing case on the ground that it involved the fixing of compensation for services for which there had been no advance agreement, whereas compensation in this case was fixed in advance on a yearly basis. But, the New York Court of Appeals clearly held that the trial court had final power of revision over the compensation of counsel for the liquidator whether the compensation was fixed by the liquidator in advance or was left open to be fixed after completion of the services. The holding is especially significant in view of the fact that the intermediate court had held that the trial court had power to cut down the superintendent’s award of compensation but had no power to increase it.
If the tenuous distinction between the cases found by the majority be nevertheless a valid one, cannot the district court achieve the same result in this case? If the attorneys are administrative employees, they owe for their salaries only forty hours of work per week. Article 5165a, Vernon’s Annotated Texas Statutes. The record indicates that they have been working in excess of the number of hours for which they are paid by salary. What, then, is to prevent the court from allowing a “claim” for extra compensation for overtime work ?
If the Legislature had not intended the courts to have final power and jurisdiction to determine the compensation for personal services and other expenses to be paid from the assets of an insurance company in receivership, it should not have placed the assets in the custody of the court, and should not have conferred upon the courts what we termed in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 853, “an extensive judicial control of delinquency proceedings.” Having done so, however, we are brought face to face with the question of whether the Board or the courts have the veto power when the two cannot agree. May the Board veto the extensive judicial control of the courts over the assets committed to their custody? Or may the courts exercise a right of veto over Board proposals? The majority have, in effect, answered these questions in favor of the Board and have thus approved legisla*295tive and administrative interference with the exercise of constitutional judicial power.
Once an insurance receivership is begun in a district court and that court acquires control of the receivership assets, the power to deal with the assets in the payment of receivership expenses is conferred on the courts by sections 1 and 8 of Article V of the Constitution. Any legislation which interferes with the effective exercise of that power and hampers the court in its effective exercise is unconstitutional and void. 11 Am.Jur. 908, Constitutional Law, § 206. We recognized that to be the rule in State Board of Insurance v. Betts, 308 S.W.2d 846, 851. Apparently the majority have now abandoned it; else, how can it be said that an administrative agency may exercise a power of veto over the reasonable exercise of the power by the court? I repeat, the right of the Board to determine the compensation of attorneys engaged in liquidating receivership assets should be held directory and sec. 12(b) of Art. 21.28 would then have no unconstitutional aspects. That, in effect, was the holding of the courts in State ex rel. Sorensen v. State Bank of Minatare, 123 Neb. 109, 242 N.W. 278 and Cooper v. Otero, 38 N.M. 164, 29 P.2d 341.
The step the majority have taken to resolve a confused and unwholesome situation arising out of a conflict of authority is neither a logical nor a proper one. It makes for confusion twice confused. It puts this court in the receivership business. Whereas the statute purports to confer the power of administering insurance receiver-ships on the State Board of Insurance under the supervision of the district courts, we have now said, in effect, that this court will assume final supervision of all of the acts of the trial court in supervising the details of such proceedings, and will, in a mandamus proceeding, expunge any order made by a district judge not proposed or approved by the State Board of Insurance. Or is it only those orders not approved by us? The court should not permit itself to be so used to perfect imperfections in the law. That is a legislative and not a judicial function.
The inharmonious relationship between the State Board of Insurance and the District Judge of the 98th Judicial District is unfortunate. It is not within the province of this court to assess fault for that situation, or to question the motives of either. I do not do so. I assume that both have acted in the good faith belief that they were exercising only those powers which the law conferred upon them for a proper administration of insurance receiverships. Which has the final power in the premises is a legal question, not a personal one. The question is not to be decided by sharp words or insinuations with respect to the conduct of either agency. They have found no place in this opinion.
I would deny the writ of mandamus in this case.

. “Section 1. The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided 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.”