State Board of Insurance v. Betts

Board of Insurance Et Al v. Honorable Chas. O. Judge County, District of Travis Texas. Coure Wimberly District, Et Al. 98th and Horace Judicial July 16, No. 6870. Decided (315 286) S.W. 2d Series Attorney General, Fred and G. K. Wilson, Will Werkenthin Attorney relator. Assistants Richards, General Worth, Harry Pollard, of Fort Cantey, Hanger, Johnson, S. Hebdon, of Austin and of San Rudy Price, Eskridge, Groce & respondents. Antonio, for Mr. delivered the of the Court. Justice Norvell original action of mandamus wherein This pray Insurance and the Commissioner expunge, respondent be instructed to naught May him, aside, 1, allowed to V. and hold for order entered dated purports monthly compensation to increase the 1958 which Taylor, Croix, F. Horace and A. M. La liquidator-receiver company in insurance re- pending ceivership in the District cases Court of Travis Coun- ty, Texas, 98th Judicial District. 21.28, Article

Respondents contend that directory only despite of the Insurance Code Legislature. by mandatory import the words selected as follows: particular involved reads The sub-section “(b) Expenses. Appointments, The Board shall compensation liquidator power appoint and fix the counsel, clerks, assistants, special deputy liquidators, or of such may necessary. payment compensation as it The deem expenses liquidation by liquidator and all shall be made approval out of funds or assets of the insurer on of the Board. report expenses liquidator An itemized of such sworn to Board, approved by presented shall be to the court from time, approved by time account shall be which the Court objection (10) days unless is filed thereto within ten after the presentation objection, any, of the account. The if must be made by party specify objected a at interest and shall the item or items ground objection. to and of such The court shall hearing, objection notifying parties down for setting. proof upon party objecting The shall burden to show objected that improper, the items are unnecessary or exces- sive.” (Under Code, the 1957 amendment to the to fix

compensation upon See, devolved the Insurance Commissioner. Betts, Board of Insurance v. (Cause No. A-6540) Leg. 2d S.W. 1.c. 949. Acts 55th Ch. 1454; incl., p. Arts 1.02 to 1.09 Vernon’s Anno. Code) Texas Ins. challenge order makes no reference to the statute and the Judge undoubtedly possessed believed that he the author- ity salaries, stipends to raise the fees attorneys or serving in his Court without reference statutory powers vested in the State Board of Insurance and the Insurance Commis- abundantly sioner. This is made clear the terms of the order recites, itself which as a taken, basis for the action there compensation paid had been no increase to such 1957, although May 1, since accordingly the work load had increased. was May 1, 1958, ordered “that effective Taylor, V. F. LeCroix, attorneys, Horace and A. M. addi- month, tional fees the sum of $50.00 addition legal fees and heretofore authorized and set Orders ** Court; *.” 21.28, only provides Article that the Insurance supervision under Commissioner State Board of In- Code) (Artcile 1.02 the Insurance shall have surance also appoint fix the of counsel but compensa- payments or directs the method and means supervisory of the district tion be made. particular detail. cuort in this set forth in some also unliquidated claim not here concerned with an unsettled attorney receiver, but rather rendered for services specified employment with month to month (State case, of Insurance v. in the first Betts basis. While 846), we A-6540, No. Judge with extensive recognized vested was com- statutory plan of insurance supervisory powers our under rehabilitation, pany not hold liquidation and we did only. directory The District 21.28 of Article were by raise the attempted unilateral action here has employed a lawyers semi- monthly compensation paid to be legal permanent in receiver- work involved basis to handle the Company Casualty ship not the case cases. do believe America, 736, cited our former 244 N.Y. 155 N.E. unliquidated an opinion, supports involved this action. That case attorney. applicable The for services rendered claim statutory provision was that: “* * * superinten- special deputy compensation of such The taking assistants, counsel,

dents, and all clerks and any conducting liquidating possession of and business superintendent, corporation shall be fixed shall, court, approval on certificate of of the paid or assets of such superintendent, out of the funds corporation.” superinten- Appeals held that York Court

The New not an clothed with absolute dent of insurance was arbitrator “judge authority a and thus be to settle the claim and final makes, however, opinion, a distinction be- his own cause.” employed agreed at an rate of com- the case where one tween pensation (in possesses the court veto under which case statute) and the case wherein no of com- York rate th New pensation implication set the amount thereof left gives rise to an unsettled latter situation claim law. This New York in the case. considered Court cited the one was employment agreed Here, what amounts to an at an we have compensation. adopted A scale had rate been respondent have been in accord 1,May Judge sought On 1958 the District therewith. ance reason that in his the stated of salaries for effect an increase respon inadequate and unfair to such salaries were doing attorneys. dis a field of so he encroached In dent cretionary power Department statute. Insurance in the vested to an insurance transactions incident fact numerous supervision placed company receivership of the under the destroy discretionary operate does not (Title Mortgage Guaranty Department, People v. Insurance Re justify Co.), 69, 190 153, A.L.R. nor will it N.E. 264 N.Y. overriding support questioned statute in order to our Department permit to set the salaries order. To engaged companies liquidation of insurance does of those necessarily the constitutional interfere with government. pointed judicial As out in the first Betts branch winding necessarily up corporation’s case, affairs is not (This 846). judicial function. S.W. suggestion present In there is no case of nonaction on part Board of Insurance or the Insurance Com- missioner was the situation in the former case. We therefore disputed statutory conclude that authorization lie to order is void. There is no supporting hence a writ mandamus will expunge void order from records of the 98th Dis- Sup. trict Court. Board of Insurance v. Texas Ct. (Cause A-6901) No. 2d 279. respondents Wimberly Some contention is made on behalf of fifty per pay and Le that their Croix dollar month raise was by budget permitted order of the Board of Insurance and that liquidator-receiver Judge’s the consented to the District action May 1, appears prior from the exhibits before us that some time filing respondent Judge, action, the of this rather Department than the Insurance had effect set the amount of salary paid attorneys representing liquida- or fees to be to the the tor-receiver in 98th District Court. May respondent acting Judge 1957 the On setting Court, entered

the 98th District certain orders and allow- legal ing following respondents, namely, fees to the V. F. Taylor per ($10,800.00 per year), month $900.00 Horace — per ($7,800.00 per year), month and A. $650.00 M. — ($7,200.00per year). month Le $600.00 Croix— time this action was taken At the there was in effect an 628 January dated Insurance Commissioners

order of the Board of following salaries for specified maximum 25, attorneys 1957 which Legal Liquidation Division in the Section Department: the Insurance practice Attorney person licensed be 1 Chief —to Courts, $9,600. and Federal practice in the State Attorneys persons licensed to

2 be—to Courts, $7,500. and Federal practice persons Attorneys licensed to be —to Texas, $6,900.

Courts May (prior the effective date of the 1957 On Code) of Insurance the Insurance Board amendments Osorio, Mark Commissioners, composed of John J. P. Gibbs May cognizance Betts’ order took Wentz recognized a the orders of conflict and Judge between Board, salary but nevertheless scale set provided that: adopted an order which recited and salary of this Board dated established Order “The scale attorneys Liquidation Division January salary scale authorized is in line with Attorney Department This Board General’s State. higher pay for the can find no reason for scale Liquidation than that authorized Division of the Board Department. Attorney General’s members However, employed by must Liquidator this Board issue employees, salary at month to these the end of this checks conflicting position of this between Orders Board is in a he pending Therefore, further said Court. of this Orders Attorney legal study and research this Board and Department of the between the conflict Orders of General’s Court, hereby Board authorizes and the said District Wheeler, Liquidator, J. D. to issue checks in line with its May, the said District for the month said Court Orders salary payments only, and future will further Board, or its successor.” Orders 28,1957, after the effective date of the June 1957 amend- On Code, Harrison, A. to the Insurance William Commis- ments position Insurance, by pre- re-affirmed taken sioner practically in words with identical those here- decessor out, liquidator salary authorized the “to issue inabove

629 checks in line for the said orders of District Court June, 1957, only.” month orders entered there- Similar were completion subsequent pending after Harrison months legal study being and research conducted the Insurance Department Attorney General. adopted

On October 1957 the Commissioner of Insurance budget following relating order which contained the items Legal attorneys Department to the maximum salaries for Liquidation Division: Attorney, $10,800.00. 1 General Attorneys, $8,400.00

3 Attorneys, $7,500.00

3 per pay While Taylor by month raise $50.00 awarded to Judge May 1, the District per year 1958 would abe $600.00 $10,800.00 increase over the provided annual by the May 1, order of 1957 and budget thus exceed the maximum by $600.0, Wimberly allowance say and Le Croix their ($600 plus month plus $50.00 $7200) increase $7800 $600 $8,400.00 figure would not budget exceed the set as the attorneys maximum three budget in the October They say prior order. also entry that sometime May 1, liquidator-receiver order 1958 the James M. William- orally proposed son had said that the were “okeh” $50.00 raises with him. problem may suggested by

Whatever these various orders and May 1, prior actions obviated the fact that to the order of being actually and Le Croix were $7,800.00 $7,200.00, annual salaries of respectively; these salaries had not been raised action of the Board of Commissioner, or the Insurance contrary but on the go along said Board and Commissioner refused to with the Dis- Judge (or approve liquidator-receiver, trict the okeh of the actually if that his okeh was given) we assume an offi- May 14, directly challenged cial order dated Judge’s raising action in the salaries of the men- This order states that: tioned. “It come to the attention of the has State Board of Insurance * * * May 1, of Insurance that on Commissioner increasing Court entered an order

the 98th District the com- pensation paid Taylor, Wimberly to Messrs. and Le Croix Fifty ($50.00) the sum of Dollars month. This increase to approved by has not been authorized and Board of Insurance Commissioner of Insurance Code, authority 21.28, of Article Texas Insurance under need, necessity propriety the increase has not State Board of Insurance or the made known been by anyone. of Insurance Commissioner of Insurance Board of Insurance Commissioner the State not in District Court is accordance such Order of 98th 21.28, law, particular, Texas Article Section Insurance Code.” again of whether confronted with are thus We 21.28, 12(b) Insur- of Article Sec.

or not merely directory. difference see no substantial are ance Code on the one hand position and Le Croix between purporting to raise Taylor on the other. order that of respondents is void and we assume three man- writ of treat them. Otherwise will so prayed issue as for. will damus conditionally granted. No motion of mandamus

The writ rehearing Rule Texas Rules of entertained. will be Procedure. Civil July 16,

Opinion delivered concurring.

Mr. Justice Smith concurring my opinion in expressions Cause contained et Honorable of Insurance al. v. A-6901, Chas. State Board No. County, of Travis Betts, Judge District Court 98th O. adopted al., et Texas concurring opinion Cause. my July 16, 1958. Opinion delivered dissenting Calvert Mr. Justice that the order under from respectfully dissent I perfectly is a I order valid believe the void. in this case attack held, Art. if, And order. Code, Insur- Board of vests

21.28, Texas anee exclusive to fix the employed represent to the receiver in insurance liquidations, I then believe statute to that extent contra- venes Section 1 Article II of the Constitution of Texas1 and is itself void. occupy

The order under attack in this case does not the same A-6901, day as the order this status held void in No. Cause Betts, State Board of v. Insurance Chas. O. agreed holding

315 2d I S.W. in that case. Moreover, I satisfied that recent am our decision in Cause No. A-6540, Betts, Board of Insurance State v. Chas. O. this volume supports holding 2d our S.W. Cause No. A-6901, equally support I am satisfied that it does not majority contrary, view in this case. On decision and jurisdictions the decisions from other state on we there which holding compel relied seem to me to the order under attack this case is not void. question should not mistake the true which we are to whether, opinion,

decide this case. is not in our schedule set Board of Insurance State more reason- Judge. able than that set whether, It is not opinion, receivership proceedings our these could be more ex- peditiously economically administered the State Board than the District Court. The is this: to governmental agency, which the State Board of Insurance or Court, do the Constitution and laws of this state jurisdiction confide to control the administra- final receivership tion of the assets? majority hold that sec. of Art. 21.28 confides jurisdiction that final to the State Board of Insur- ance, imposes and that the statute mandatory the court a duty approve to whatever may action the Board take with respect fixing liquidator, to deputy liqui- dators, counsel, clerks, holding assistants. It is so that the proceeding are able to declare order involved in this Wholly

void. aside from fact that the directly contrary to what we said in of Insurance 1. The of the Government of the Section of Texas shall divided departments, separate body three distinct each which shall into of be confided to a magistracy, Legislative one; wit: Those which those which are Execu another, another; person, and those which are Judicial tive no or col persons, being departments, any power lection of of one these shall exercise except properly others, express attached to either of the in the instances herein ly permitted.” hardly

v. will stand analysis I examination and as shall undertake demonstrate. my position It is that Art. 21.28 should considered and light interpreted a whole in the and fundamental basic state, and that is done the law of when purport empower (b) fix the Board to salaries sec. 12 directory only. be held to be should provide purely administrative Article 21.28 does companies. liquidation of insolvent insurance suggests, amicus curiae but it did not intended have so supervision liquidations provide. and control of so Extensive very Many of terms that Article. in the courts of vested conferring statutory provisions judicial are noted control Betts, of v. O. in Chas. in our 846, 852, they 2d need not be noted enough my judgment in note in It is to those detail here. increasing compensation attor give validity of to the order neys. against company receivership proceeding an insurance

A (sec. 1(b) only a ), in court a court may be commenced necessity appointment a for the of receiver. may determine any at may, its own motion and time 2(a). on The court may “as neces- during proceeding, such orders deemed issue proceed- or the with the receiver sary prevent interference Upon 4(b). ing, the assets of the insurer.” Sec. of or waste duty of the receiver to the assets it is the taking possession of “subject to the direction of steps liquidate them take standing alone, 2(e). would seem provisions, These court.” Sec. attack in this case. But the order under authorize sufficient put beyond question it so, to make not if that be provided 2(b) where it is of sec. opening sentence cus- insurer shall be in the of such and assets property “the the commencement of such the date of tody court as of proceedings.” delinquency removing of insolvent insurance com- the assets from Far courts, receivership from control of the in are panies which companies the assets of such thus committed Legislature has legis. assets are in custodia custody the courts. Such government of the State of Texas over them powers The government, and under the judicial branch lie person II of the “no 1 of Article Constitution sec. Legislative or Executive persons” branches collection or government any attached may exercise to the courts. paid compensation paid the three is not from Legislative

any Executive fund either or over which government compensation is branches has control. general special. fund, if not from a state either Even fund, legis- companies assets of these were a state control, they payment lative not could be made available personal appropriation without services Legislature they But which has not here been made. Legislature fund, ap- are not in state could not have propriated specific them to a use state even had it tried. The recognized itself on its basic limitation own provided (b) approval by when in sec. 12 for final expenditures courts of all receivership from funds or assets. passing In appoint of a attorney court to State Board of 83, 93, Insurance v. 308 S.W. 846, 853, language: we used this "If, discharge supervision placed the duties of by statute, him decides that other or additional proper counsel essential administration pending receivership case, decision, may while it be sub- ject proceedings, correction other be held void a mandamus showing action in the aof clear absence of un- reasonable, capricious arbitrary and action.” setting same provides section of Art. 21.28 which for the by of salaries language the Board uses mandatory the same in providing appointment the counsel of the Board. It is suggested not that the court in this case has acted unreason- ably, capriciously arbitrarily adding compensation in attorneys. of fact, the three As a majority matter of as the opinion discloses, compensation the of attorneys of two the as set the court within the of budget limits the Board’s own budget figure the third only slightly. exceeds the Are we position not in holding now of that while the court not encourage long and reward hard work hours those already employed to expenditure the extent of an of $1800.00 per year, may it attorney another add at a cost to the receiver- ship $7,000 of $10,000 per year? from to go far prepared How are we in that sec.

imposes mandatory on duty approve, courts ques- without Having tion, that the court all the held salaries Board? figure it compensation re- the of cannot increase gards reasonable, that hold the as fair and must we then figure, compensation Board’s cannot reduce the below the court regards great on if the as an encroachment it too even receivership performed? of And or out line with services assets provides expenses? types 12(b) also of other of Section what expenses properly approve reports of the court shall that objec- liquidator-receiver, unless and filed authenticated the days. itself is filed ten that mean that the court tion may within Does not, motion, expenditures it other re- its own authorize gards proper preservation the receiver- in the assets of approve” mandatory ship? “shall Does the use of words objec- power, in the mean the court without absence regards tion, accounts and items it to audit such eliminate improper or wasteful assets? language mandatory more Art. 21.28 than

There no in says quoted 2(a). from that which has been sec. above property company assets an insolvent insurance custody Having placed “shall of the court.” thus custody charged the courts assets courts with administering preserving them, responsibility final power then courts the final has denuded the carry making responsibility by out the orders of courts agency? of an I think the veto administrative May it not. I think do so? not. quoted approval cited and from the case In re America,

Casualty Co. of as authori- N.Y. N.E. ty for our Board of Insurance v. decision again it 308 S.W. cite distinguish it. The their in this case now seek hardly true that York court distinction is valid. It is New question of trial had before it the narrow upward attorney court to revise allowed engaged by Superintendent had of In- whose services been compensa- agreement advance as to surance without paid. deciding But in court found tion to be respec- necessary the of the much broader determine statutory powers liquidator supervising court. tive governing provision New statute was in York language pro- of 21.28. It the as sec. Art. same much Am., Casualty vided, In. quoted from re Co. of N.Y. [as 443, 448, : 155 N.E. 736]

“ superintendent purposes section, shall ‘For the of the seal, or appoint, his and official one under hand agent special superintendents insurance, deputy his more of agents, employ counsel, or and and assistants such clerks may give persons necessary, such be each of him deemed powers may such to assist him as he consider wise. The com- pensation counsel, special deputy superintendents, of such clerks assistants, taking possession and ducting all of of and con- corporation liquidating any

the of shall business subject approval superintendent, be fixed court, shall, superintendent, on certificate be ” corporation.’ out of funds or assets of such interpreting In respective statute delineate superintendent court, Appeals trial Court of opinion by in an able Chief Justice said: Cordoza liquidator may “The it the administration convenient find deputies agreed the business to hire or clerks or at an counsel compensation, result, agreement rate or to attain like when has approval been omitted in advance bill or account, approval being settlement an or the settlement may ineffective without venient, the creditor’s assent. He find it con- incurring expenses, when other to follow the same course. He has under the to do this if he statute will. however, any The statute is notice to him one who deals him, agreement, merely form, whatever its is of provisional validity. may He fix the rate of aas assignee trustee or for creditors or a receiver be said (Cf. to fix it 9), L. c. but at times to approval meaning the court. is that even when he 448, acts, the court shall have a veto. N.Y. 155 N.E. [244 449] H* v Hs He “Argument fixing is liquidator made that what the does service, altogether

the value exempt if not from review courts, exempt must be held to unless and discre- tion flagrantly wrong, have been merely he abused. When helpless, wrong very indeed, but when he is its authority is restored. There can be no basis for this distinction unless assumption superintendent impeachable arbitrator whose award is not for error merits, impeachable only determination of the for mistake appearing upon thereof, fraud, the face or for abdication duty (Cases cited). he equivalent But arbitrator to fraud. * * * sought more not, already have to show. Terms we stamp any him in this

distinct than to be found enactment must super- power judge the will be shorn of the before courts N.E. vision that would otherwise be theirs.” 155 indicated, distinguished the fore- majority, The seek to compensa- going ground fixing of case on the that the involved it agree- tion for there no advance for services had been ment, advance compensation in whereas in this was fixed case clearly Appeals yearly But, on a basis. the New York Court the power over held compensation trial revision the court had final com- the liquidator the whether counsel for pensation left liquidator or was fixed in advance was open completion The fixed after of the services. -significant interme- especially in of the fact view down power cut diate trial had court had held that the court power superintendent’s compensation had no award it. increase If the tenuous found distinction between cases majority one, court nevertheless a valid cannot district attorneys are ad- same achieve the result case? If the forty employees, they salaries ministrative owe for their 5165a, hours Annotated of work Article Vernon’s week. they work- Texas ing have been Statutes. record indicates paid they are for which excess of of hours number allowing prevent salary. What, then, is to from compensation a “claim” extra for overtime work? If have not intended the courts to had final per- jurisdiction to determine the assets sonal from the services and other to be receivership, company of an not have insurance should placed court, custody,of assets in and should not have termed in Board conferred the courts what we 846, 853, of Insurance v. judicial delinquency proceedings.” “an extensive control Having brought so, however, done we are face to face with the whether Board or the courts the veto agree. ex- May the when the two cannot Board veto judicial tensive control of the courts over assets committed right custody? courts over their Or exercise of veto effect, have, proposals? these answered legisla- questions approved thus in favor of the Board and have con- tive and exercise of administrative interference power. judicial stitutional begun receivership

Once insurance is in a district assets, acquires rceivership and that court control of the power receivership payment to deal with the assets in the of is conferred on the of Article courts sections 1 8 Any legislation V of the Constitution. which interferes with power hampers effective that its exercise of the court in effective exercise is unconstitutional and void. 11 Am. Jur. Law, recognized

Constitutional rule Sec. 206. We to be the in State Board of Insurance v. 308 S.W. Apparently else, majority it; 851. now have abandoned agency may how can it be said exercise a administrative power by over the veto reasonable exercise repeat, right compen- court? I of the Board to determine the engaged liquidating receivership sation in assets directory should held be sec. of Art. 21.28 would then aspects. That, effect, have no unconstitutional in was the Minatare, courts State ex rel Bank Sorenson v. State Otero, Cooper 123 Neb. 278 v. N.M. N.W. Pac. 2d step a have taken to resolve confused and arising

unwholesome situation of a out conflict of logical proper a neither nor a one. It makes for confusion twice puts receivership confused. It this court in the business. Where purports administering as the statute to confer the in- receiverships surance on the Board of Insurance under the supervision courts, said, effect, of the district we have now supervision that this court will assume the acts of final supervising proceedings, trial court in the details of such will, proceeding, expunge any in a mandamus order made judge a proposed approved by district not or the State Board approved by Insurance. Or is those not us The orders ? permit imperfec- not perfect court should itself to so used to legislative tions a judicial in the law. That is and not function. relationship inharmonious between the State Insurance and the District 98th Judicial province unfornate. is not within the of this court to assess situation, fault the motives of either. I good do not do so. I faith assume that have acted both they exercising only belief that were those proper law for a administration of insur- conferred them premises receiverships. power ance has final Which legal personal question is not to question, one. The respect to the con- sharp insinuations with decided words or opinion. agency. They place in this either found no duct of deny case. I the writ of mandamus would Opinion July 16, 1958. delivered

Case Details

Case Name: State Board of Insurance v. Betts

Court Name: Texas Supreme Court

Date Published: Jul 16, 1958

Citation: 315 S.W.2d 286

Docket Number: A-6901

Court Abbreviation: Tex.