*1 Legislature Plath ease the fact that placed had in separate inhibited acts and distinct sub- enumerated nothing divisions. There is in the nature specified acts in section 499a nor section, structure of the however, which necessitates such a conclusion here.
As above, stated purpose the whole tenor and of section and, 499a against is directed the theft electricity in our opinion, the section states but one offense. It follows that plaintiff original complaint the conviction of on charging conclusively violation thereof established that there was probable cause for prosecution proceeding on complaint merely the amended a retrial necessitated by the reversal the conviction. judgment is affirmed.
Shenk, J., Curtis, J., Edmonds, J., Carter, J., Traynor, J., and Peters, pro tern., J. concurred. A. No. In 17678. Bank. June
[L. 1943.] CAMINETTI, etc., JR, A. Commissioner, as Insurance Peti- Appellant,
tioner and LIFE IN- PACIFIC MUTUAL (a OF Corpora- SURANCE COMPANY CALIFORNIA tion) al., Respondents; WILLIAM H. NEBLETT et et al., Respondents Appellants.
Mitchell, Silberberg, Knupp, Eugene Fay, Roth & P. Peery Price for Appellant. Petitioner and Neblett, pro. per., Brill,
Wm. H. Josiah E. Walter Guth- rie, Nunnelley, Miller, James P. Vernon Bettin and E. W. Respondents Alfred F. Appellants. MacDonald Overton, Lyman Plumb, Ford, Lyman & P. Donald H. Robertson, Cosgrove O’Neil, Cramer, & John R. N. Edward Young, Morton, Byron Hanna & Hanna, Mannon, C. J. M. Jr., Black, Harold A. Burnham Enersen and Hobson & Gar- rett for Respondents.
GIBSON,
C. J.In
the business and assets of the
Pacific Mutual
Company
(here-
Life Insurance
of California
after called
“old company”)
were taken
over
statutory
Insurance Commissioner of
pursuant
this state
authority.
(Ins. Code,
1013.)
re-
Thereafter,
§§
spondent Pacific
(here-
Mutual Life
Company
Insurance
*7
after
company”)
organized
called the “new
was
part
as
plan
of rehabilitation
company by
of the old
the commis-
purchased
sioner who
its
capital
entire
stock with assets of
company.
old
to section 1043 of
Pursuant
the Insurance
Code, a “Rehabilitation
agreement
and Reinsurance”
was
entered into
company
between the new
and Samuel L. Car-
penter, Jr., the
Commissioner,
then Insurance
as conservator
company.
agreement
the old
contemplated
a transfer
to the
company
new
of the assets of the
company
old
(except
against
certain claims
officers and directors of the old com-
pany)
assumption
and
by
the former
obligations
of the
latter, excluding
what is known as
policies.
“non-can”
company
The new
obligation
also assumed a limited
with re-
spect
policies
agreed
to the non-can
and
aup
special
to set
for
fund
capital
restoration
benefits thereunder. The
company
by
of the new
towas
be held
liquidator
conservator benefit
creditors,
of the
policyholders,
company.
stockholders of the old
and
On De-
4, 1936,
cember
approval.
received court
legality
original
seizure and
plan
the lawfulness of the
Pa-
(Carpenter v.
upheld
appeal.
were
on
761], af-
P.2d
Co.,
Cal.2d
Mutual
Ins.
[74
cific
Life
170,
firmed Neblett an made 182].) February 2, 1937, order was L.Ed. On liquidation company appoint- old and providing for liquidator. legality ing Commissioner as the Insurance v. (Carpenter on upheld appeal. likewise this order was 637].) Co., [89, P.2d Mutual 13 Cal.2d Ins. Pacific Life litigation background is set prolonged of this The factual only repeated will here prior forth in the decisions and be understanding necessary problems insofar as is to an Mutual Carpenter (Cf. present appeals. raised on the Pacific Li Ins. Cal.2d fe trans- April 1938, 4, On the stock by voting ferred the then commissioner voting trustees. Commissioner Cam- persons five named as June,. in June, 1939, inetti succeeded the office why directing to show cause sought respondents an order directed to retransfer voting trustees be should not in- trust was ground stock to him upon the had December, a motion thereto, Prior valid. grounds by William H. Neblett upon been noticed similar court denied both May 8, 1940, superior and others. On orders of denial applications. taken from these Appeals were single exceptions. bill of Certain presented upon and are appellants. to all common contentions are made which are al., made which Other Neblett et contentions clarity they will join. purposes commissioner does For headings. grouped separate be under appellants. all A. common to Contentions support Appellants main contentions advance three (1) urged is their claim that the is invalid. Code, upon relied section 1037 of the Insurance trust, respondents authority creation of the for the company; (2) that the new inapplicable to the stock of to authorize the section is unconstitutional if construed pres- not obtained in the trust; (3) approval, that court of a for the creation case, under the required ent code *8 voting trust. (e). 1037
(1) Applicability section taking “Upon 1937, provides: (e), Section 1037 enacted any possession any person property and business exclusively commissioner, proceeding article, under this
353 except article, as expressly provided otherwise this or liquidator: (e) either as conservator . . . Shall have au- thority to transfer a or trustees, to trustee under a agreement, the stock of an insurer here- heretofore or after him as liquidator issued as conservator or to connec- tion with agreement, a rehabilitation reinsurance or or proceeding agree- other under article. Such right shall upon ment confer the trustee or trustees the to or stock, vote represent otherwise not be irrev- such and shall period twenty-one ocable for a (21) years.” more than Appellants contend that this section must be construed to operate prospectively to the exclusion of the stock company prior enactment, which had been its issued and further the section was not intended apply organized, stock an insurer company, as was the new as a through medium which rehabilitation of the business of á delinquent insurance accomplished. was to be ordinarily
The rule that statutes are
construed to
operate prospectively
upon
is
presumed
based
intent of
(Jones
Legislature.
Co.,
v.
Oil
Union
Cal. 775 [25
5];
Rarity, 210
P.2d
Krause v.
Cal. 644
P.
77 A.L.R.
[293
1327];
Ott,
Cal.App.
Anderson v.
526];
P.2d
[15
Selig,
can be no room 591, P.2d County 9 594 Angeles, Los Cal.2d Church v. [71 ; 285, 1 287 1106]; Riley P.2d Robbins, v. Cal.2d 715] [34 428, 1].) 431 People Stanley, v. 193 Cal. P. [225 applies here, In of our that the statute view conclusion rejection evi- prejudice from the could have resulted no at time to show that by dence commissioner offered other insurers to of its enactment he held stock of which assertedly apply. statute was intended re (e) trust with
Section 1037
authorizes
or
“conservator
issued to the commissioner as
spect
stock
suggested
the stock of
liquidator.”
It has been
that
as
as “con
to the commissioner not
company
new
was issued
special contractual
trustee.
liquidator”
or
but as a
servator
agreement or
is
rehabilitation
court
nothing in the
There
commis
to indicate that this
was issued to the
orders
liqui
of conservator or
capacity
sioner
other than that
agree
contemplated
the section. The
dator as
as “con
only
held
refers
to stock
ment
25
that he
liquidator”,
paragraph
provides
servator or
agreement “only in his
provisions of
is bound
Liquidator
.
of the Old Com
capacity as . . Conservator or
4, 1936, approving
order of December
pany.” The court
“as
provides
commissioner
conservator
carry
its cove
liquidator”
or .
.
is authorized
out
. . .
.
“The
order, this
stated:
appeal from that
nants. On
Commissioner,
either as Conservator
provides
Plan
all of the stock of
Liquidator,
continue
hold
shall
Co.,
(Carpenter
Mutual
Ins.
Company....”
New
v.
Life
Pacific
322.)
p.
Finally, the
P.2d
at
order
355 803]; Carpenter 217 Cal.2d P.2d v. Mutual [43 Life Pacific 761]; 330, 335, Ins. Cal.2d P.2d [74 Carpenter, Cal.App.2d 649, 654-656 P.2d Garris 688]; Superior Court, Evans v. Cal.2d cf. (2) Constitutionality (e). section next here contended that section 1037 con- legislative impairment of con- strued unconstitutional *10 obligations, taking tract a property process, as of without due legislative judi- a upon powers encroachment the of the ciary, legislative delegation and as an This power. unlawful of follows, argued, assertedly because the vio- agreement lates the terms of the rehabilitation the orders and of the superior approving providing for the same liquidation the of old company. the The contention that con- property rights tract and impaired are a requires considera- tion of of the terms the agreement and court orders, rights thereunder, of effect agreement thereon.
The rehabilitation provides that the stock company, new which already organized had been as the cor- porate agent of the commissioner, shall continue to be held by the commissioner (Carpenter as conservator. v. Pacific Mutual Ins. 321-325 Cal.2d Life assets the old company were to be to transferred company new and, in return, the new company was to assume obligations except the old company respect with policies. non-can company new also assumed a limited obligation respect agreed to such non-can policies and to set up special a fund for the restoration of full benefits policies. under those Paragraph 20 agreement, en- titled “Mutualization Disposition of Stock of New Com- pany,” relates to the ultimate status and ownership company. provides that neither the conservator liquidator nor “dispose shall of” the stock of new com- pany except follows: (a) Subdivision authorizes the commissioner to dispose of stock plan accordance with of mutualization there- after adopted the policyholders of the new company, and disposition may such include transfer to trustees plan if of mutualization so provides. (b) Subdivision merger, consolidation, reorganization authorizes or reinsur- (e) gives ance. company Subdivision old option non- under the pay the full amount needed restore benefits in that event policies and can authorizes (d) upon court order. author-- distribute the stock Subdivision if, upon court order commissioner to izes the sell the any time, required for at that such a sale he determines liquidation. states protection of estate in Subdivision of this purpose, that “It is the and intent spirit, eliminated that, provisions unless the for mutualization are (b) provisions subparagraph para- of this pursuant to the Company shall be sold graph the stock the New disposed prior full under to the restoration benefits so mutualization, for except proceedings Policies Non-Can long probability completing restoration as a reasonable shall continue. ...” Sub- Non-Can benefits under Policies (f) severability clause. contains usual division placed charge of a company the new are affairs of agreement expressly confides board of directors to whom the however, large Supervisory powers, of discretion. measure commissioner, independent of and in addi- reserved are statutory delinquent com- powers tion to his over insurance For or reinvestment of panies. example, no investment may ap- without assets of the old be made written proval Payments to the restoration fund the commissioner. com- subject approval of policies non-can to the *11 may payments in further who, addition, require missioner the The of directors of thereto. determination the board among of expenses exchange of the assets apportionment and subject to departments company of the new is the several against adjustment policies commissioner. Reserves by the subject assumption or reinsurance company of the to old agreement com- under the were to be established the new re- in the pany approval the of and accordance with with of holder of the quirements the commissioner. While thereto, voting rights incident the possessed agreement to express provision respect the contains no with voting power. of the exercise the hand, on the voting trust, The other is contract between and trus- liquidator commissioner as conservator or named the of primary purposes of It recites that “it is one the tees. accomplishment of all of agreement this to the full assure Agreement Rehabilitation purposes intents and of the therefore de- parties accordance its terms. The hereto with agreement is be construed provision clare that no any any in a which would result violation manner provisions or o£ said Rehabilitation terms, agreements, here- agreement provided Agreement; any or and covenant if contrary any said express provision . should be .. said Agreement, contrary policy Rehabilitation or cove- Agreement . . then such covenant or Rehabilitation . void, nants, and agreement agreements, shall be null and separable remaining shall be portions deemed hereof. from ” . . . [Italics added.] given legal are title of the new trustees to the stock company power to exercise all the with the owner- ship. commissioner, however, retains entire beneficial company interest for the benefit of creditors of the old and others interested. The trust undertakes to transfer to only stock, relating duties trustees administrative right principally the to vote the same. The trust is made period twenty-one slightly years, irrevocable less than except may be terminated sooner accordance provisions of paragraph agree- 20 of the rehabilitation Moreover, ment. it must be the Legislature conceded that may terminate the trust at an earlier date. agreements
The two not inconsistent, as contended by appellants, but on contrary agreement, therein, as declared supplement intended to does carrying facilitate the provisions out of the rehabilita- agreement. tion parties of the apparent intent from portion agreement, quoted above, which declares that if of its covenants are contrary to the such covenants “shall be null and void.” Appellants contend against restriction dis-
posal in paragraph 20 of the rehabilitation pre- cludes the creation of a trust. provision, they This argue, gave policyholders right to have the commissioner company, by administer the new means of power to vote its stock. language Neither the nor purpose the re- striction supports interpretation. Paragraph 20 relates only to the ultimate status ownership com- pany, including possible mutualization and full restoration of benefits policies. to non-can It does not pertain the admin- istration of the new supervisory powers *12 commissioner fully which are set forth in paragraphs. other As in 20, indicated paragraph subdivision of the purpose of the restriction is to prevent disposition such a sale or of
358
prema-
off
permit the transferees to cut
the stock as would
to
policyholders
of
either mutualization
turely
the
policies.
non-can
to
restoration of benefits under the
full
“dispose of,”
paragraph,
as used in the
The words
stock,
any complete alienation of the
but do
directed at
management
company by
of
prohibit
transfer of the
voting rights
pending
stock
means of transfer of the
in
else-
quoted phrase is used
this sense
rehabilitation. The
agreement
1,
(e),
(a)).
19
20
(paragraphs
where in the
a
instru-
part
Words used in
certain
in one
of an
sense
in an-
sense
ment are deemed
been used in
same
have
316, 24
313,
156
319
P.
(Pringle Wilson,
other.
Cal.
[104
286.)
1090];
L.R.A. N.S.
It is true
words
Cal.Jur.
(a)
paragraph
in
of
“dispose of” are used
subdivision
an authorization to the commissioner
in connection with
trustees
of
transfer
it
clear that
plan
mutualization. But
accordance with
provided
would
under that subdivision the transfer there
carry
require a
alienation
the stock
order
complete
contemplated therein.
plan
of mutualization
out
agreement
disposal
trust
is not
(cid:127)The
meaning
purpose
paragraph
stock within the
Although
trust
agreement.
rehabilitation
trans-
stock,
expressly
legal
fers to the trustees the
title to
“the entire beneficial interest
reserves
’’
therefore retains for the bene-
such stock. The commissioner
company the
the old
fit of the stockholders and creditors of
statutory
possessed as
he theretofore
same substantial interest
359 by creating the swer the contention that commissioner to voting trust had “all that he had.” transferred inconsistency voting
Nor find do we between 1936, 4, trust and the court orders. The order of December does approve no more than rehabilitation en- the prior provide actions of commissioner and its voting If reha- forcement. trust consistent with agreement, equally bilitation it is consistent with the court voting jurisdic- order. The trust does not interfere with the And, tion retained the court over the commissioner. as order, stated in the was to do authorized necessary reasonably was deemed to whatever effectuate agreement “either order of this without further for liquidation 1937, pro- court.” The order February 2, vides “that to all property respondent title and assets corporation company] old now in said vested Commis- [the conservator, together sioner as said right, with all title interest said Commissioner as said conservator in said stock of Pacific Mutual Life Company Insurance [the company], shall remain in Commissioner, and be vested said office, liquidator. and his successor as ...” provi- This “obviously sion . was . liquidation . inserted order provide . . . in order alteration in the commis- carrying sioner’s duties in on the business of the old com- pany conservator, winding as up liquidator, it should not (Carpenter divest nor disturb his titles.” v. Mu- Pacific tual Co., Ins. 13 306, 312 637].) Cal.2d [89 Life purport prohibit It does not changes future com- missioner’s title. prior commissioner to the creation voting rights exercised the incident to ownership. It is contended, effect, that continued exercise of power this necessary the commissioner is safeguard the interests right the creditors and is a acquired substantive under approving order agreement. rehabilitation
power upon conferred commissioner to create a does authorize him to alter modify the substantive parties any plan as set forth in of rehabilitation attempt and no such Bather, made in case. permits a transfer of duty administrative the stock from one instrumentality state to another. There is no constitu right tional to particular remedy form or to the enforce (Neblett remedy ment particular of such state official. 297, 182]; Carpenter, 305 U.S. S.Ct. 83 L.Ed. [59 78 L.Ed. Zimmerman, S.Ct. Gibbes v. U.S. In re & N.Y. 342]; Westchester T. T. cf. agreement nor the court N.E. Neither power Legislature restrict orders undertake to in another state the duties of commissioner to transfer to do so strumentality, may any attempt and it well be improper. would be
The board of trustees created under section agency may, opinion, properly in our serve a state *14 although private persons. are instrumentality, members its example, di- Similar are familiar the law. For devices at corporation rectors of a the course dissolution were its affairs— time, by statute, up made trustees to wind one court powers their from the statute alone and were derived 74, appointment unnecessary. (Rossi Caire, 174 Cal. was v. Millsap, 765 1161]; 80-81 P. 197 Cal. Clark v. [161 [242 918]; 1490-1493.) corpora- privately P. 6A A owned Cal.Jur. together voting trust, instru- tion, proper held mentality of for administration of German the United States (United Foundation, patents. Chemical chemical States v. 131].) 1, 1, 18-19 71 National banks 272 S.Ct. L.Ed. U.S. [47 though they privately owned are federal instrumentalities Savings Bank, (Davis 161 U.S. controlled. v. Elmira Bk. 700]; 283 40 First Nat. v. Cali- 275, 502, L.Ed. S.Ct. [16 1030]; 602, 67 L.Ed. fornia, 366, 262 368 S.Ct. U.S. [43 cf. Maryland (U.S. 1819), 4 316 Wheat. L.Ed. McCulloch v. [4 71.) 12 51 The members of the 579]; U.S.C.A., 24, seq., et §§ pub- Regents University of are not California Board 655, (Lundy Delmas, 104 658-660 P. lic Cal. officers. v. [38 651].) for the 445, 26 L.R.A. A new has been substituted bank an banking in the superintendent state 558, 79 64 295 U.S. S.Ct. (Doty Love, v. [55 insolvent bank. 1438].) proceeding And 1303, L.Ed. 96 A.L.R. corporate agent of the commis- as the was created corporation Mu- company. (Carpenter V. rehabilitating the old sioner in 307, 324-325 P.2d 321-322, 10 Co., [74 Ins. Cal.2d tual Life 170, 305 U.S. 302 S.Ct. Carpenter, 297, 761]; Neblett v. [59 182].) 83 L.Ed. however, assume, that exercise Even if we were to is a of the stock power agreement the rehabilitation obligation under contractual (e) section 1037 author orders, not follow that would
361
izing
power
exercise of that
violates the
trustees
against
impairment
constitutional inhibitions
contracts
taking
process
It is
property
without due
law.
legis
property
yield
contract and
must
settled that
general
(Carpenter
lation
the interest
welfare.
v.
Co.,
307,
10
331
Mutual
P.2d
Ins.
Cal.2d
[74
Life
Pacific
Court,
Agricultural
Superior
761];
Prorate
v.
Commission
550,
5
495];
554
Veix
etc.
Cal.2d
P.2d
v. Sixth Ward
[55
32,
792,
310
40
84
Union
Assn.,
1061];
U.S.
S.Ct.
L.Ed.
[60
Dry
Georgia
Corp., 248
372,
Goods Co. v.
U.S.
375-377
P. S.
117,
39
power
S.Ct.
63 L.Ed.
That the
of the com
respect
proceedings against
missioner with
in
statutory
general
delinquent
public
solvent or
insurers is of
concern is
open
question.
(See Carpenter
Mutual
v. Pacific
Life
Ins.
terest served the permitting commissioner to the utilize technique corporate control even as to stock to theretofore issued him. Its determination finds in support following the statutory considerations: As receiver of delin quent many insurers stock of insurers is to the issued com missioner duty with the result that the exercising the power seriously thereof would upon encroach his to time the statutory detriment of other duties. The use of a also to conflicting serves obviate interests might which arise from the exercise voting power commissioner’s incident possession to of the stock of an insurer and his exercise regulatory power over companies general. insurance in possible continuity management also makes in and uniformity in policy. The fact that the trust form of manage is mandatory discretionary ment not but with the commis sioner is a argument against not valid the propriety legislation. That means were other available to attain a legi not the statute unconstitutional. objective render does
tímate in section constitutes authorization contained objectives. effecting foregoing a reasonable means of & in In Bond York trial re New decision 623], N.Y.S. Misc. Mortgage Guarantee authority by not for the contention is appellants, cited police power. (e) is a exercise proper section 1037 & Mort- factually distinguishable. There the Bond The ease guaranteed company] old had gage Company Guarantee [the & Trust by the Title Guarantee mortgage issued certificates to Company also had contract Bond Company and the subsequently was mortgages. Company The Bond service (similar to Ins. Schaekno Act Calif. under the rehabilitated organized 1043). Code, superintendent insurance § Corporation company] and Mortgage new the Bond & [the company. its rehabilitator the old capital received entered servicing court order a contract was Pursuant to Company. company and the Title Sub- into between the new Mortgage Legislature enacted the Commission sequently the Mortgage to authorize the Commission purported Act which superintendent certain from the assets com- to take over rehabilitation, including servicing panies contracts. under mortgage sought enjoin the Mort- certificates Holders mortgages gage taking over the Commission from Legislature servicing The court held that the had contracts. company no assets that power to take from new had been given approved it contract and pursuant court. case, considering propriety holding in Without only in point here. It if inapplicable we find would be present purported had take Legislature case from given plan. assets to it under the rehabilitation urged private fixing pri- It is that while a contract subject rights proper police power, to a exercise of vate where, im- here, rule obtains the contract was different acting first posed upon parties instance the state general We of no author- the interests of the welfare. know ity holding may such situation the state not there- contrary, legislate subject. on same On the state after bargain away police power its even cannot abdicate Goldsboro, (Atlantic grant Coast Line R. express R. Co. v. 721]), S.Ct. L.Ed. U.S. "public” subject a so-called contract are under further *16 they their existence. power exercise to which owe contention is that made section 1037 here
363 legislative upon powers results encroachment construed upon premise judiciary. This conclusion is based Legislature’s authorization a that sanc approving a modification of tions the orders rehabilitation liquidation, in orders the providing for which that court directed title to the stock should remain be above, As vested the commissioner. shown Assuming is not with inconsistent those orders. inconsistency, judicial an however, upon no encroachment power Ordinarily judgment may resulted. of a court by legislative (Lincoln not be modified altered action v. Alexander, Am.Rep. 52 482 ; Cal. Wildes, State v. [28 639] 34 94 P. 595]; Tucker, Nev. 128 N.Y. Gilman v. [116 1040, Am.St.Rep. 464, 190 N.E. 26 13 304]) L.R.A. be [28 judgment cause a is a form protected of contract con process tract and due and federal clauses the state Consti (Hodges Snyder, tutions. v. 600 U.S. S.Ct. [43 819]; Drainage L.Ed. Mooney v. Dist. No. Neb. ; N.W. In re & Mortgage Bond Corp., Guarantee [278 368] Misc. N.Y.S. A further reason has been legislation advanced the effect infringement that such is an upon judicial government. the functions of the branch (See Alexander, Drainage Lincoln supra; Mooney v. Dist. 1, supra.) No. Thus, Wildes, supra, State v. where jurisdiction Nevada court had assumed equity to appoint liquidation receiver and conduct of a held bank, was Legislature that the could not statute transfer liquida tion proceeding into the hands of the state bank examiner. decision, however, controlling is not pro here. This ceeding wholly statutory. imposed duties upon commissioner, the supervision over him vested in the courts, result from the Responsibility devising statute. for procedures of liquidation Leg rests with the particular islature and the fact procedure been has approved respect to a specific plan of rehabilitation does legislative not foreclose further pro action with respect to cedural In matters. the case of In re Westchester Title & Trust 268 N.Y. 19], N.E. court denied infringement judicial power resulted the Legisla where passed ture transferring a statute the functions of a court- appointed agent financing Mortgage to a Commission follow ing insolvency former. The (p. court there said ; 441) Legislature provide could “The method
364 the mortgage for benefit of these investments administration of invasion in without of those interested such investments (Cf. Supreme equity powers the Court over trusts." the 153 Barreiro, Cal.App. 125 P.2d Estate [13 superior court present Nor is situation altered because the the specifically jurisdiction 4 retained in its order of December retained expressly proceeding. over the Jurisdiction was not voting of controlling supervising the or the purpose for jurisdiction to fraud The court had correct stock. by commis power or abuse in the exercise of voting trus jurisdiction possesses It the same over sioner. Trusts, (1 187) and Restatement of the tees Law § judicial not therefore curtailed function. statute has is 1037 It also that as construed section here asserted delegation legislative power (e) constitutes an invalid is by no standards which commissioner because there are determining voting trusts. guided up in to set to be when powers given discretion and broad The commissioner wide is proceedings. the use trusts guide conclud- appears powers for exercise those ing which authorizes him to do provision of section 1037 may expedient or for the accom- necessary deem “which he ’’ proceedings. This plishment purpose or in aid of of such Legislature by and controlling is standard considered challenge to against this under the decisions as is sufficient constitutionality. (Cf. Gaylord City v. Pasa- the statute’s People Grain 433, 439 v. Globe dena, 348]; 175 Cal. P. [166 Milk 3]; Jersey 124 121, 211 Cal. P. Maid & Mill. [294 620, 577].) As Brock, 13 Cal.2d Products Co. v. 121, Foundation, U.S. said United States Chemical necessary Legis- not 1,71 131], L.Ed. “It S.Ct. was [the each ease. The to ascertain the facts deal with lature] reasonably practicable under the cir- as far as was Act went province existing." peculiarly is within the cumstances when know the facts and determine of the commissioner to effectively carry necessary expedient voting trust plan of rehabilitation. out a
(3) approval. Court
Appellants contend that the is invalid thereof approval was secured. Section because court requirement approval. for court (e), contains no however, in- that none requirement indicates of such The absence suggested opening paragraph This tended. grants commissioner, exclu- authority to “the section which It is sively except expressly provided.” also and otherwise suggested (d) of section 1037 fact that subdivision 1041, re- expressly well as sections By quire certain of the commissioner. approval court acts subsequent enactment of section 1037 without such in- requirement it must omission was be concluded insist, Appellants however, tended. of a creation meaning in this case of sections came within the (d) required approval therefore contemplated compel those This contention would sections. *18 requirement (e). us to such read into section 1037 Section (d) commissioner sell, 1037 or authorizes the to transfer dis- pose of personal any real or property person prop- whose erty provided that, and business if has been taken over property transaction involves the market value of which is $1,000, permission over must court obtained. This re- be quirement no application voting has the creation of a a separate provision under of the statute makes no spe- which requirement cific for approval. court A clear distinction ex- ists disposal between a (d) of assets under section 1037 voting (another transfer of board power to a of trustees instrumentality) state under 1037 section in which rights substantive of the parties corpus and the are not disturbed. Section 1043 authorizes the commissioner to enter agreements upon into rehabilitation Ap- court order. pellants voting contend that the a modification of trust was was, effect, rehabilitation in a new and plan of different requiring approval. As above, stated modify trust does not alter or provisions agreement. does, of the rehabilitation if Even it however, only the modification concerns administrative duties connected with the stock of and does not way. alter in any substantive It follows that the trust does not constitute a new rehabilitation approval which court is required under section 1043. B. Contentions Neblett, al. et We now turn to a consideration of contentions of Neb- lett and in join. others which the commissioner does not urged Neblett motion that the trust was invalid it because constituted a contract which Commissioner Car- penter through personally ownership interested of poli- cies insurance in company, the old later converted into
366 920, pro- company. Code, in the new Political section policies city county, Legislature, state, vides: “Members any made contract township officers,must be interested capacity. them in their official Contracts made ...” at public may capacity officer his official be avoided except any interested officer where party instance of (Polit- indirect interest therein. the officer has direct P. Moody 922; Shuffleton, ical Cal. Code § P. 73 Am. 1095]; Cal. Woodward, Berka v. Rep. 31, question pres- in the St. L.R.A. The sole precluded case is the commissioner sent whether section making relating Mutual, from contracts Pacific for must be persons of commissioner may hold conceded office subject they companies to the act. although policies own (Prior provided 1941 section of the Insurance Code eligible officer, agent, “An of an insurer is not employee commissioner,” anyone it did not render to the office but ineligible 1941 the ownership policies, and in because of permit ownership.) such specifically section was clarified to Legislature provisions has that certain directed authorizing Code, including the sections Insurance into agreements, to be carried trusts and rehabilitation disqual- If were effect the commissioner. he respect delinquent insurers in ified to act with which policy- policies, holds and their creditors and such insurers No deprived many benefits of the code. holders would be the commissioner's du- perform other officer is authorized *19 like- ties, agents or would act, deputies if he cannot his and In a must assumed disqualified. be such situation it be wise act re- Legislature intended that the commissioner might policies in the gardless hold possibility of he delinquent Jurispru- 42 company. in American As said necessity, to exception, upon dence 312 “There is an based of officer. An disqualification rule an administrative of to officer, disqualified, act, still if failure may his otherwise justice.” in necessarily failure of act would result a necessity in this to of applied been state members rule of has in charged hearing protests connection municipal bodies Curd, (Federal v. assessments. Construction Co. with street Homan, 1202]; Nider 469, v. 489 2 A.L.R. 179 P. Cal. [177 cf. con- 136].) rule is not 11, 32 17 P.2d Cal.App.2d [89 (Marion exercising functions. quasi-judicial fined officers Howard, 196 County v. Boone Ind. Township [147 of 619]; c,f. Capital Young, 109 P. N.E. Gas v. Cal. Co. [41 869, 29 L.R.A.
Appellant Neblett contends also that the commis- personal by- sioner’s interest trust is established provisions granting expenses him not author- therein fees and by law. allowances to expressly ized the commissioner are expenses, give his and this cannot held to him limited be personal a in the interest trust. argued
It is also sec- that the amendments authority had repealing tions 1016 and 1037 effect of of to hold title old property the commissioner to the liquidator terminating company as and of rehabili- entire tation After proceeding. amendments, section 1016 con- following language: “Upon hearing tained the full of such an application, may directing the court order wind- make by ing liquidation person up of the business of such and commissioner, liquidator, purpose carrying of out for liquidate up per- the order wind the business such statutory son.” language This furnishes sufficient for basis exercise of commissioner’s duties under order court liquidator company, the old an does constitute implied repeal authority him. previously vested in authority up voting trusts,
Neither does the to set con- upon ferred (e), section 1037 constitute repeal an implied provisions 1043 authorizing of section plans commissioner enter into of rehabilitation. Appellants contend requirement that the omission approval for impliedly court section repeals former provisions because, latter effect, section it author- plans izes the commissioner to create new approval despite court the fact re- without that section 1043 quires approval' plans court Repeals rehabilitation. (Rexstrew implication City are not in the law favored v. Huntington Park, 20 630, 23]; Cal.2d Railroad 54, Riley, no 415]), Commission Cal. P. repeal be implied need under the facts of found this case. Section 1037 plans does not authorize new of rehabilita- approval. tion without court
Finally, juris- it is contended the trial lost diction proceeding to act reason its made order February continuing on the hearing “until the com- pletion concurrently pending equity trial” of action in *20 issues, involving It said equity the same is that the action appealed from herein until after the completed was not orders shows, per- however, appellants were made. record that proceeding equity mitted issues in this the the raised voting together respect action with trust to be heard the Any error, therefore, determin- matter of convenience. equity must ing proceeding completion this before the case be deemed waived. suggested, upon grounds
Additional for reversal are based the alleged judge denied disqualification the trial who the invalidity upon motions the asserted here involved and agreement. questions are considered These basic rehabilitation herewith. companion cases decided and determined post, (Caminetti Mutual Ins. p. v. Pacific Life p. 393 Co., post, Ins. Neblett v. Mutual ; P.2d 930] Pacific Life the con 934].) The therein that conclusion reached upon appeal. this tentions are unfounded is determinative are orders affirmed. tern., Shenk, Curtis, Spence, pro concurred. J., J., and J. PETERS, pro tem. J. I dissent. (1) Is questions appeals:
Two basic these presented are on agreement trust with the so inconsistent rehabili- obligation tation of contracts ? impairs the it (2) sec- Can such be created under 1037(e) tion approval? Insurance Code without court majority opinion theOn first issue holds that the two agreements inconsistent, no are that there is impairment contracts, if obligation and that even there is such impairment justified police power. under the it On that, interpreted, properly second issue holds section challenged trust without authorizes the creation of this the first approval. position dissent on inconsistent; issue, agreements the two obligation impairs impairing contracts policyholders who into of thousands of entered reorganiza- on the basis contracts courts; that such im- plan approved them tion justified police power; under the and that cannot be pairment judicial nugatory several orders al- voting trust renders po- issue the second takes ready On dissent made. majority given construction the section sition that *21 amendment; language it compelled by is not of the that re- unconstitutional; that it results renders the section peal by implication subsection of section another abrogates Code; Insurance and and section of the another only after voting such a trust can be entered into first that securing approval. agreement so incon- Are provisions trust agreement provisions the rehabilitation
sistent with the they impair that vested obligation contracts a/nd rights? question This the section disposed should be of before construed, obligation for if impairs trust abrogates rights contracts the court and vested on the faith of section, approved agreement, rehabilitation as construed by majority, as in would be unconstitutional violation of impair- Constitutions, both the federal state unless such and justified ment is police under This power. issue relevant question construction, to the because, equally if two reason- able possible, constructions are which does not make the that preferred statute unconstitutional is to to a be construction accomplishes which result. that comparison
A
provisions
agreements
of the two
they
incompatible.
demonstrates
provides
disposition
for a
of the stock of the new
company
by
expressly
a manner
agreement.
forbidden
was entered into
Carpenter
April 4,
on
Prior to
Carpenter
1938.
that time
held the en-
capital
company
stock
special
tire
new
as a
trustee
under the
a
Agree-
terms of
“Rehabilitation and Reinsurance
4, 1936,
ment”
on
July 22,
into December
as of
entered
1936.
background
history
contract,
of that
approved by
by law,
required
sufficiently
as
court order
have been
set forth
(Carpenter
in prior decisions.
v.
Mut.
Insurance
Pacific
Life
10Co.,
761],
Cal.2d 307
P.2d
aff. in
Section Rehabilitation Reinsurance of ment of Disposition is entitled “Mutualization and Stock commissioner, New Company.” that the as con- provides liquidator of company, dispose servator or of old shall the not any capital except the new company pro- stock of following exceptions only vided therein. The are the ones specified: the (a) of section 20 provides Subdivision may company of stock of new dispose commissioner the with of any plan may accordance mutualization which there- policy company, after be holders the new adopted of might disposition and that transfer to such include a (b) plan provided. trustees if the so Subdivision contains problem. other provisions present not involved Sub- (c) giving company division contains a old provision option off pay to needed to restore benefits under amount policies authorizing commissioner to “non-can” and dispose company of the stock of new in accordance with any settlement of pursuant court order entered to such full (d) obligations company. Subdivision author- old capital izes the to sell stock of the new com- commissioner any pany upon if, time, of at he determines that order required such protection liqui- a sale is for the the estate in of (e) provides: purpose, spirit, dation. “It is the Subdivision agreement that, provisions and of this for intent unless mqtualizatioii pursuant provisions eliminated 20, the of the New (b) paragraph of this subparagraph full prior to the Company disposed sold shall be except pro- under Non-Can Policies restoration of benefits probability long a reasonable ceedings mutualization, so for Policies under of benefits Non-Can completing restoration (f) the usual contains continue. . Subdivision shall . plan of rehabilitation severability The effect of clause. legal commissioner title place was to in the hands of the parted for he new in return which company the stock of the legal company. title as old He held the assets and policyholders for of the creditors trustee the benefit com- capital the old whom the stock of company (Carpenter remaining pany most asset. important was the Co., 10 Ins. Cal.2d Mut. Pacific Life application Samuel L. February 1937, upon On Commissioner, an Carpenter, Jr., as the court made Insurance reciting the commissioner had trans- liquidation order company all old to the new Pacific ferred the assets of the Company except capital stock Mutual Life Insurance might company have the new claims the old that since against present its The order stated past officers. old any further efforts conserve the business of the com- commissioner, thereby pany appeared ap- futile to the he up directed wind its pointed liquidator and business. creditors, company, policy- its liabilities of the old July 22, 1936, holders shareholders fixed as of were plan date when the rehabilitation effective. Section became liquidation order provided: the'court’s “That title respondent all old property corporation and assets of [the *23 company] now in said as vested Commissioner said conserva- tor, together all right, title and interest of said Commis- sioner as in Life said conservator said of Pacific Mutual stock Company company], shall remain be Insurance and [the^new Commissioner, in in office, vested said successor and his of liquidator Company of The Mutual Life Pacific Insurance ’’ California. When commissioner, powers upon the under the conferred by Code, him company the Insurance took over the old in July every policy company, totalling of millions dollars, agency organization in placed jeopardy. of was The good danger being- old company and the will was in plan, resulting ultimately The in the lost. rehabilitation court approved agreement, attempt by an was
commissioner, acting pursuant provisions of section Code, emergency of the Insurance this by meet creat ing company policies. new take over the solvent basis that, acting plan pursuant of that provisions was to the agreement, commissioner was to hold and control company stock until all claimants paid. new were agreement policy this fundamental expressly Pursuant provided quoted in section that supra, prohibited disposing from the stock except pro Policyholders given plan. vided in the were the election accepting policies company filing the new or of claims against company. dissenting assenting the old As to both and integral policyholders, part an the contract was that Commissioner, state Insurance until all claimants paid, were policy management would control the and company new through ownership the stock. The inducement held out secure and approval, court the inducement held to the out policyholders, was the new company, plan, under this private management, into could not be returned but that the company management remain new would under the con and trol of the Commissioner until all Insurance claimants were paid. (Carpenter Ins. Mut. Cal.2d Pacific Life superior approved court plan control, on the of continued basis commissioner and the court’s quoted liquidation, expressly order of supra, provided that company remain in the stock of the should the commis sioner his successor office. The action of superior and agreement the reorganization in approving court was affirmed by Supreme again this court and United Court, States hypothesis every on the per interested by the protected provision son’s were that control the hands of his would remain the commissioner and successor in On that office. basis thousands of policyholders Direct and made their election. continuous commissioner con very approved trol was essence of contract. Now happened? what 1938, after April 4,
On had been entered court, into approved policy- and after thousands of changed position thereon, holders had their reliance Car- penter Voting Agree- entered into Pacific Mutual Trust challenged. purports ment here to be contract between liquidator Carpenter as conservator the old four on side, on the named trustees one other. *24 re- of the agreement purposes recites voting trust July 1936, will be facilitated agreement of habilitation of legal capital in the new of title by the transfer character and abil- trustees of established company “All stock . . shall provides: of said . ity. Paragraph Fourth trust, held, in shall dis- Trustees and be be received of, pro- Trustees as disposed by the tributed, otherwise in agreement agreement. While this continues vided in this legal all of shall have full title to shares effect the Trustees company] deposited Corporation stock of the [the hereunder, and shall be entitled to or held them every rights powers all of thereto respect exercise with had Depositor which the name and nature [the commissioner] provided/’ The may expressly herein except as be otherwise period slightly of less than was irrevocable for trust made years except it could be terminated sooner twenty-one any powers exercise of of him in 20 of Paragraph the stock reserved to disposition over Agreement. Paragraph the Rehabilitation and Reinsurance Trustees, agreement provides: “The Eighth of the Agreement fairing this shall he vested the continuance of their possess with and and shall he entitled to exercise in shall an powers discretion all the absolute owner hy agreed held them hereunder. the stock ...” The trustees carry faithfully obligations of the commissioner out agreement. Paragraph set forth the rehabilitation Eleventh Depositor commissioner], pro- states: as herein “The [the vided, in the retains beneficial interest shares stock which subject Voting Paragraph Trust. are the matter this ...” Twenty-third “It provides: primary purposes one agreement accomplishment the full of all this assure purposes Agreement Rehabilitation the intents and parties its terms. hereto therefore de- accordance with no of this is to be construed provision clare that any in a manner which would result violation terms, agreements, provisions of said Rehabilitation Agreement. ...” legal effect of purpose
The obvious commissioner, a state of- from the transfer trustees, legal ficial, private to a board of title to responsibilities all and duties which devolved stock and and holder of the special trustee upon the commissioner as stock of under the rehabilitation capital the new agreement. require does not extended comment to demonstrate *25 voting agreement trust provisions violates the Re- Agreement.
habilitation Section of the Rehabilitation Agreement provides Reinsurance shall dispose except the stock the new company as therein provided. exceptions provided The (1) are: Pursuant to the any plan terms of for mutualization of company; the new (2) according to court company proved order if the old able pay obligations off its under policies; the “Non-Can” by (3) court order necessary safeguard where deems it he liquidation. interests of the in estate The first and third of these alternatives contemplate change in corpus of the trust held for by the creditors of company, the old the first mutualization of company the new exchange and the last of the stock of the company for a piece more secure property. The second contemplates alternative a termination of the trust event old raised sufficient funds pay obligations. off its agreement legal trust full transfers title to board of trustees in a situation where the rehabilitation trust continue, is to but it is not a transfer pursuant plan to a mutualization nor one safeguard made order to the estate in liquidation. If the creation of the trust were not contrary provisions to the agreement of the rehabilitation then 1037(e) section superfluous. majority But the concedes that the sole power source of to transfer title to the stock to the voting trustees is to be in that found section. majority opinion dispute does not this transfer provided is not for in the does, however, rehabilitation plan. It argue that the plan rehabilitation prohibit does not this trans- fer, urging that section 20 plan of the rehabilitation uses “dispose of” in the sense an disposition absolute of the stock, rather than merely legal a transfer of in trust. title argument This is unsound. plan by The rehabilitation ex- pressly providing that the commissioner shall not dispose except stock specific under certain provides conditions the exclusive modes which the may dispose commissioner of the stock. The attempt to meaning limit the of “dispose” to absolute alienation directly is met although the fact that one the exceptions provided in the plan a transfer to voting trustees, such transfer pursuant must be to a plan of mutualization of the new company under section 20(a). Furthermore, under the rehabilitation plan the com- missioner was a trustee company. old creditors legal title to Thus, all the stock. The beneficial he had was he company. all of the old Since creditors interest was legal title, transfer of all that had is he had was the meaning obviously disposition of the stock within plan. the rehabilitation 356-357) lays great upon majority opinion (pp. stress any “if covenant
provision of the contrary should be agreement provided or herein . . . Agreement, or con- express provision of said Rehabilitation trary Agreement . . then policy of said Rehabilitation . covenants, agreements, shall such covenant ’ agreement expressly be null void. the rehabilitation ’-Since disposing except prohibits the commissioner’s authorized, question specifically disposition and since the authorized, under its is not void own so provisions. *26 majority opinion argues, however, agree- that the two
The voting agreement are not inconsistent but that the trust ments supplement carry- to and does and facilitate “is intended agreement” rehabilitation ing provisions out of the by (p. 357), apparent provision and states that this is made any voting is quoted above that if covenant of the trust con- trary agreement it is null The to the and void. voting argument that is that because the trust states it was facilitate agreement, intended to the rehabilitation and be- provisions that if of its to contrary cause it states agreement provisions the rehabilitation such are null and void, provisions none its can violate the rehabilitation sequitur non agreement. The is obvious. The rehabilitation agreement provided that the commissioner should exercise voting rights; voting trust provides power that such by voting provision trustees. Such is should be exercised Agreement” “contrary policy of said Rehabilitation contrary “express provision an and is said Rehabilita- ’’ voting Agreement. provision purport- trust tion voting power to is to transfer this trustees therefore ing very voting void” under the terms trust. “null and however, majority states, “Although that opinion legal transfers to the to the trustees title trust ‘the stock, expressly it reserves to the commissioner entire ’ in such commissioner therefore interest stock. The beneficial stockholders for the benefit of the and creditors of retains pos- the same substantial interest he theretofore old ’’ statutory (p. 358.) sessed as trustee. It is true that the voting provides that trust the commissioner retains en- “the tire beneficial interest” in the provides stock. But it also legal “full title” voting thereto transferred to the trustees may “they rights in order that exercise the of stockholders Corporation,” the control of the and that the trustees “shall respect rights be entitled to exercise thereto all powers every Depositor name and nature which the except expressly had” provided subsequent otherwise. A paragraph provides “Trustees, during that the the continu- Agreement ance of this shall possess be vested with and shall and shall be entitled to exercise their discretion all the powers by of an absolute owner of the stock held them hereunder.” majority opinion places several states that
voting simply the commissioner transferred voting “administrative duties” of the stock to the trustees retaining while the “beneficial interest” in the stock. Just what meant a transfer of the “administrative duties” power the stock is not clear. The that was trans- ferred to power the trustees trust was the vote company. the stock of the new What does 100% mean ? means that prior It to creation of commissioner had power elect the entire board of di- Through rectors of the new company. the exercise of that power power he had duty and was his control the general policy corporation of a with several millions hundred powers dollars assets. was these voluntarily he transferred to the trustees. To characterize such im- portant duty functions the mere “administrative” of vot- ing the stock does not importance. Moreover, minimize their no has retained “beneficial interest” in the *27 stock, He was not stock. the beneficial owner the and never legal interest had beneficial therein. He had the title as trustee, provided. and the rehabilitation so In Carpenter Mut. Ins. Cal.2d 307 [74 Pacific Life court, at p. 335, referring to what the 761] showed, “It record there stated: discloses that as for trustee company, all including creditors of the old dissenters, the all company. commissioner holds of the stock of the new ...” policyholders The creditors and and stockholders the old company owned and still own the beneficial in the interest legal subject stock. The commissioner had the title forth rehabilitation agreement. terms of the trust set his rights, all of title, and all that all those He transferred nothng a “beneficial” There was the trustees. duties to every- He transferred for him to retain. or otherwise nature nothing. thing and retained he had no that there is opinion seeks show majority then court voting trust and the various inconsistency between the consistent with voting if trust is course orders. Of likewise consistent with is interest the stock of all his orders. If a transfer of the re- provisions express not violate trustees did transfer, then the prohibiting such agreement- habilitation in the court provision not the similar did violate transfer out, voting trust does pointed But, already orders. agreement. For of the rehabilitation provisions violate quoted. order heretofore it violates the court the same reasons is majority opinion argument in the next advanced transfer of the ad- voting merely “permits a that the trust one instru- duty voting stock from state ministrative 359). mentality (p. page On the next another” thought upon, and it further elaborated opinion this agency are definitely that trustees a “state held 1037(e) and instrumentality” that all section or and “to of the commis- do is transfer the duties instrumentality.” thought is then state sioner to another agency board, a state that the trustees are expressed banks, national instrumentality in the same sense government agencies, or that although owned, are privately although University California, not Regents of il- governmental agency. Other officials, constitute public given. In all illus- lustrations of a similar nature are agency majority however, the given opinion, in the trations by statute, only designated but its duties involved was (See provisions law. functions were fixed Act, U.S.C.A., seq.; pro- 21 et National Bank sec. relating IX, Constitution, Art. sec. of the State visions of University.) It of duties and Regents of is because to the they imposed upon them the statute functions instrumentalities, not simply because agencies state In appointment. the instant provides the statute their nor of the Insurance Code case neither section on imposes any duties the trustees. provision law other fixed contract—the and functions are Their duties Except in that their agreement. nrovided contract *28 any private trustee, duties are different from those of no they governmental agency no more constitute a than do by appointed trustees will or contract. argument voting govern- that the trustees constitute a agency
mental overlooks nature and source their func- voting rights, tions under the trust. pow- The commissioner’s ers and duties company over the stock of the new not were by rights, powers defined statute—those out and duties arose of and obligations had their sole source the contractual provisions of agreement. the rehabilitation these was rights, powers voluntarily and duties that were transferred by to voting powers trustees rights, the commissioner. The voting and duties of the trustees over the of the 'new company by They are not defined statute. have their sole agreement. source being This so the transfer voting purely commissioner a to trustees of power contractual governmental cannot make the trustees a agency. They are appointed pursuant contractual trustees to statute. only governmental function the commissioner exercised over the stock company of the new was as con- liquidator servator or company. the old stock of the new company is the principal asset of the creditors of the old company. The commissioner still all possesses of his powers and duties liquidator as conservator and company. old None of those official duties have been to the transferred voting trustees. The liquidator commissioner is still the conservator company. Certainly of the old it is to be as- sumed that Legislature authorization to create a to
intended remove the commissioner as conserva- tor or liquidator, and substitute in place to his only way trustees. Yet the voting trustees can be held governmental agency be a hold, contrary fact, to the trustees have been substituted as conservator liquidator in place of the commissioner. The true fact in voting trustees performing the stock are not governmental a all, function at performing but are duties solely being created they contract. That so not in governmental agency. sense superior
When the approve court was asked to the re- agreement setting habilitation up company new over take company the assets of the old one major problems presented to the court and to the creditors the old was the of a selection trustee for the stock of the com- dug consideration, pany. parties After agreement, that it of all court, determined the interest official public qualifications, with the concerned select duties, experience, functions and staff of the insurance com- *29 They bank, corporation, missioner. could have selected a trustees, contract, they private but, as a matter of selected legislature no as trustee. insurance commissioner The has power permit appoint selected trustee to another more to that than place provide trustee his it would have to that by could, private trustee selected trustor and beneficiaries beneficiaries, appoint trustor and without the consent constitutional, another trustee. If this statute is the trustor trust, their consent, and beneficiaries without are com- and, pelled they accept selected, to trustees that never have demonstrates, as this case that of them some do not want. aspect Viewed in it makes no in result difference whether gov- or a private trustees be considered board agency. have, parties by contract, ernmental Where selected trustee, public Legislature one official as a contractual is power without to him appoint public authorize to another agency contracting in his stead without the consent parties. parties The selected the Insurance Commissioner They Corporation trustee. did not select the state Commis- sioner, the Fish Game and Commissioner or official other to serve trustee, against the Legislature, the will of the contracting parties consent, and without their cannot sub- stitute agreed upon. fact, other trustees for the one In College (Dartmouth College famous Dartmouth case v. Wood- (4 ward, Wheat.) 629]) U.S. L.Ed. established this principle. Legislature In case Hampshire that at- New tempted change to of Dartmouth College trustees and to substitute new and different trustees. there held, It rule, legislative has been no deviation from that that such impairment was unconstitutional as an enactment of the ob- ligation apparent, therefore, that, of contracts. is at least falling in a police power, case not within the that the rule may lawfully statutory transfer one state functions from department another, official or has no application state department official or upon functions conferred the state but contract. statute holds that if majority opinion next even it be assumed obligations impairs of the rehabilita- that the impairment justified agreement, police is under the tion such majority opinion that “it is settled states power. rights yield legislation must in the property
contract 361). undoubtedly general (p. welfare” It is interest subject without alteration, the law that contract obligation due violating impairment of contracts and Constitution, process clauses of the when such alteration undoubtedly the necessary public It is also interest. regulate state, regulatory power, may its under law circumstances, af- business, and under certain the insurance majority rights. The cited private contract eases fect general principles beyond doubt. opinion these establish clearly Building in Home & Loan Assn. principle was stated 413, 88 Blaisdell, 290 S.Ct. 78 L.Ed. U.S. v. p. 434, only where court stated: A.L.R “Not at 1481] of con- provision qualified the measure the constitutional processes, remedial but trol the State retains over which authority safeguard possess the vital also continues to State legislation ap- of its It does not matter that people. interests modifying result of propriate to end ‘has the abro- gating already Stephenson Binford, in effect.’ contracts *30 53 288, 301, 181, 287 L.Ed. 87 A.L.R U.S. S.Ct. only existing laws read into order 721. Not contracts obligations parties, the but reservation to fix between the sovereign of power of essential attributes is also read into legal postulate policy pro- a order. The contracts as against impairment presupposes tecting contracts the mainte- government of a virtue of which contractual rela- nance while,—a government adequate tions are worth which retains good authority peace society. to secure the order of This harmonizing prohibition constitutional principle the necessary power progressive residuum of state has had recognition (See, of this Court.” Brown also, the decisions Krumm, 712]; Ferdon, P.2d v. Cal.2d Birkhofer Cal.App.2d imperative, however, impairment
It is of contract rights But public public be in the interest. what interest could present by relinquishing in the case be served commissioner returning management private control and control? impelled public changing What interest trust from commissioner, trustee, power one exercised sole where stock, private over the self-perpetuating, irrevocable vot- ing superior court, this trust? and the United Supreme approved agreement the rehabilitation States Court they opinion general were of the that it was because public that policyholders, creditors and the welfare of all con- protection for the retain the stock commissioner suggested why public reason has been cerned. No sound general advanced or the welfare interest be benefited would emergency existed. There was policy. in this change No rehabilitation change the time no in conditions between ma- (e) passed. time was agreement and the section suggests the statute was jority opinion possibility that position possible passed the commissioner avoid a to enable too argument proves much. “conflicting interests.” The the discretion mandatory. is not it to Section 1037 leaves alleged to very conflict is exist— person whom the conflict- the assumed commissioner—to determine whether the. ing Legislature interest shall be continued or settled. Had required impair- an general been of that the welfare the view in- of an assumed conflict of ment vested because manage- form of terest have would made the discretionary. suggested mandatory ment It is also and not might permit the that the amendment been intended to have exercising commissioner avoid the burden power. Legislature it been the would Had that intention persons provided for the appointment person have amendment, responsible perform duty. to him to But this according majority, permits to the the creation of a self- perpetuating independent board commissioner twenty-one years. Moreover, the time consider whether burden of too onerous or whether that was duty might re- conflict with his other was when the duties agreement habilitation time under consideration. At that was the commissioner, court, the superior this court and the Supreme United duties States Court determined that under the too were not onerous very they his did not conflict with other duties. The basis of the rehabilitation *31 informed, agency
was the qualified, impartial best and course, state Legislature to vote that stock. Of pro- could hibit the accepting position Insurance from Commissioner compel resign a trustee of such could him to from trust, or already trusteeships accepted, if it that determined such incompatible statutory duties were with the commissioner’s event, Legislature In however, duties. could com- pel contracting parties a accept trustee new selected by the commissioner their without consent. Until selec-
tion of a new trustee the fail, trust would not but, under accepted principles, supervision continue under .would a equity. court of
Respondents suggest also possibility Legislature that the may have believed that from practical a standpoint the com- might missioner unqualified, knowledge, be because of lack of to elect competent directors. If the commissioner were un- qualified to select directors whom he replace pleasure, could at equally unqualified he would be voting trustees, select latter situation judgment error in ir- would be reparable twenty-one for years. majority opinion also suggests legislation may have been intended to se- continuity cure in management. Such a contention assumes arbitrarily capriciously would change concept legislation, the board. Had that motivated the Legislature change would have mandatory made the not discretionary.
A
directly
case
in point on
In
this issue is
re Bond & Mort
gage
Guarantee
383 servicing a contract made parties of to such right lates order, performed have perform and to part any of such contract, a vested it interferes with provisions of such right a decree of which conferred an order the nature of finally adjudging the servicing part, contract is made rights provisions of such contract. parties and the rights a final of parties After determination of the to. rendered, rights passed has such ‘have proceeding such been indirectly, to beyond legislative power, directly either adjudication judg of destroy. After the fruits reach or rights vested property. ment of These became become thereby beyond placed the action of the court and were Tucker, legislative power to affect.’ Gilman v. reach 304, 1040, 1044, 13 L.R.A. 190, page 204, 128 N.Y. 28 N.E. at 26 Am.St.Rep. provisions chapter 464. . . . 638 of turning they purport require 1935, the Laws of so far as part servicing over contracts made final court such guarantee May 1, 1935, deprive prior order entered holders, corporation parties the certificate the real interest, property of law in con process of their without due 1, 6 of the this state flict with article section Constitution 377, 123, (Livingston Livingston, 173 N.Y. 66 N.E. 61 v. 800, Am.St.Rep. 600; supra; L.R.A. 93 Tucker, Gilman v. Savings Village Kings County Bank Sus Germania v. pension Newbury, 33; 159 54 v. Bridge, 362, N.Y. N.E. Burch 10 374) N.Y. Fourteenth and are conflict with the Amend v. ment to the of the United States. Coombes Constitution Memphis v. Getz, United, 434, 435, 866; 285 52 76 L.Ed. U.S. S.Ct. 293, 920; ex 24 Mc Brown, States rel. 97 U.S. L.Ed. Cullough Virginia, 102, 134, 172 19 43 L.Ed. v. U.S. S.Ct. amendment Moreover, provisions 382. the aforesaid said 1, of article impair obligations of in violation contracts States. 10, of the United section clause 1 of the Constitution 661, (81 U.S.) 14 Wall. Merchants’ Ins. Delmas v. Mut. 20 1 757; 596, L.Ed. 106 S.Ct. Henry, Red Rock v. U.S. Savings, Society 434, 251; County Clay 27 L.Ed. York, 856; 26 v. State New 104 U.S. L.Ed. Danolds 277; Sanitary York Utilization 36, Am.Rep. N.Y. New N.Y.S. Department Health, App.Div. Co. v. 586, This 510; In N.Y.S. 1009.” Cook, App.Div. re here involved. to the statute reasoning directly applicable distinguish on attempts this case majority opinion York decided was that all the New case ground away assets from a new com- Legislature could take approved plan pany up pursuant a court set result agency them to a created as the and turn over state existing emergency. point process of an that if the due protect parties approved clauses to a re- contract “emergency” in the face of an habilitation contract even *33 certainly alleged Legislature, they protect by to exist when, ease, in no interest is parties present public as impairment. served 1037 (e)
Construction Section argument, Independently of the constitutional section any voting (e) requires approval of trust that there be court ap- no pursuant provisions. its There was such adopted proval voting is, therefore, and it invalid. present of the is (e) of section 1037 of the Insurance but
Subsection Code enumerates one of six subsections. entire section acting as major powers of the commissioner when conservator liquidator. (d), part or which was of the section Subsection long (e) 1937, expressly pro- subsection was added before prop- involving personal real or vides “that no transaction erty property market shall be made where the value of the of one dollars without first involved exceeds the sum thousand only then in accord- obtaining permission court, of said and may prescribe.” terms ance with as said court Obvi- such legal ously, relinquishment capital title to all paid for the commissioner had the new which involving prop- $3,000)000 personal was a “transaction . . . market involved erty property . . . where the value majority exceeds the sum of one thousand dollars. . .” The exclusively emphasizes (e), dealing opinion subdivision voting has for This trusts, provision approval. with no court approval A for separate provision is not conclusive. court (e) pro- view of the subdivision would be redundant broad (d). its of subsection The section must read in visions entirety, be given to thereof. effect, possible, part and if be each give (e) given To to it interpretation subsection majority (d) of this court is read subsection out significant type in one of “transaction”—transfer section voting property title to creation of a trust. personal another approval necessary trust is Court of this provision 1037 a general reason. of section Subdivision dealing the commissioner conservator powers with the reorganiza- deal liquidator. specifically does not agreements. permitting tions rehabilitation The section and agreements the section under which such involved, executing the rehabilitation here acted Code. permits is section Insurance That section commissioner, liquidator “subject conservator agree- court” approval of said to enter into rehabilitation pointed out, trust modified and already ments. As approved If a plan. altered the court rehabili- agreement requires approval effective, tation court be requires approval, modification thereof for a modified plan is, Any in fact, plan. a new different other construc- permit change tion would a material in the rehabilitation plan approval nullify without court would re- thus quirement approval of court in the first The ma- instance. jority opinion by requirement construction reads the for court approval out of section 1043. holding
A that the invalid does render void the actions hy hoard directors elected the vot- ing trustees.
In the held event trust were to be invalid it jeopardize would not actions board of directors of *34 the new had been elected trus no tees. There can be doubt that acts of present board after their valid, election are though even trust is right void. Under our law the stock dependent upon to vote the records of corporation, and since the trustees appeared shareholders, right books their to vote the questioned. (Sec. stock 320(a), Code; cannot be Law Civil rence v. I. Co., N. 15 Parlier 220 Estate Cal.2d P.2d [100 765]; Angeles Los v. River Co., Owens Canal 120 Cal.App. 1064]; 380 P.2d Dedrick Whaling Co., v. 16 [7 California Cal.App.2d 284 P.2d A not appearing stockholder [60 right on the books who asserts his seek vote must aid statutory of a court election, either to secure a review of the or to (Sec. 315, secure a re-transfer of to himself. Code; Civ. 162 Bowes, ; Moore 8 Cal.2d P.2d v. [64 423] Bowes Superior Cal.App.2d v. 13 Court, 583]; 656 P.2d [57 Angeles Los Co., v. Owens River v. supra; Canal Dedrick Whaling Co., supra; Smith v. Thorn California California Cordage, Inc., v. Cal.App. 129 93 P.2d 393]; Lawrence [18 N. I. Parlier Estate Co., supra.) Even if it be assumed that particular election board directors invalid, they trustees was least are at de officers facto jure de board. corporation, powers as a and have the same corporate acts on their successfully made be No attack can (See collected cases by collateral action. or on their status & Min. Belmont Gold 1068, seq.; Storrs v. 6A Cal.Jur. et Pa 197]; arbstein P.2d Cal.App.2d Mill. [76 F 766]; Cons Cal.App. Co., Ltd., Tool Oil cific ; 2 P. Riggins, Cal. 954] umers Salt Co. v. 142, (1931), p. Corporations Private Fletcher, Cyclopedia of 618, seq.; et Cali (1936), p. seq.; Corporations et Stevens on Ballantine, ed.) by p. 90, sec. (1938 Corporation fornia Laws inter justify can argument expediency 82.) no Thus majority opinion. in the given the section pretation should be reversed. judgment Traynor, J., concurred. rehearing July denied for a
Appellants' petition re- tern., for a Traynor, J., Peters, pro voted J. 1943. hearing. June In Bank. 1943.] A. No. 17680.
[L. Commissioner, etc., Peti Jr., Insurance CAMINETTI, A. LIFE MUTUAL PACIFIC Respondent, v. tioner and (a Cor OF CALIFORNIA INSURANCE COMPANY NEB H. WILLIAM Respondents; poration) al., et al., Appellants. LETT et