34 Nev. 94 | Nev. | 1911
Lead Opinion
By the Court,
This is an original proceeding in mandamus brought by the state, upon the relation of the state bank examiner, to compel the respondent, Frank L. Wildes, as receiver of the State Bank and Trust Company, to deliver and surren
" Sec. 79. Within ten days after the approval of this act the bank examiner shall take possession of all banks and their property and accounts of whatsoever kind and nature which may now be in the custody or possession or control of any receiver or receivers heretofore appointed under the laws of this state; and said bank examiner shall thereupon proceed to administer, liquidate and settle the same as in this act provided, in so far as is necessary to complete the settlement and liquidation of the assets, business and affairs of such banks. And it is hereby made the duty of all such receivers, their agents, employees and representatives to turn over and deliver to said bank examiner, or deputy examiner appointed by him, all real and personal property, accounts, moneys, evidences of indebtedness and securities therefor, books and things of every description belonging to such bank or banks, or relating to their business, together with the possession and custody thereof; provided, that the bank examiner shall permit any such receiver to inspect such books, papers and other memoranda, or the property and things so turned over and delivered to said bank examiner, for the purpose of preparing his final accounts; and it is hereby made the duty of all receivers of banks now holding office under appointment by any court in this state, within sixty days after the approval of this act, to file with the clerks of the respective courts from which the respective appointments of said receivers issued, a full and complete statement and accounting of all their acts, receipts and disbursements, with proper vouchers, of their*113 respective receiverships, and receive their discharges from such courts when such final accounts are duly accepted and approved by said courts. And such receivers shall also deliver to the bank examiner a true and correct copy of said statement and accounting so made to the court, together with a full and complete statement of all debtors and creditors of such respective banks and receiverships, with the amount due from or to each of such debtors or creditors; and the terms and conditions of such indébt-edness; 'provided, also, that no suit, action or proceeding which may have been begun by such receiver or receivers, or in which he or they is or are a party or parties, and no right of action which may have accrued to him or them, shall be avoided or rendered ineffectual by anything herein contained, or done pursuant hereto; but such suits, actions, proceedings and rights of action may be carried on and continued and shall inure to such bank examiner for the use and-benefit of such respective trusts, as fully and effectually as if such receiver or receivers had continued as such; and the bank examiner shall not dismiss any such action, suit or other proceeding except on the order and approval of the state banking board. And the said bank examiner shall be substituted for any such receiver or receivers in any such action or proceeding now pending in which any such receiver or receivers is or are a party or parties. All attorneys, agents, clerks and assistants now in the employ or acting for and in behalf of any such receiver or receivers shall continue to Iact in the same capacity, and on the same terms and conditions, until such time as the bank examiner and state banking board shall otherwise provide. All contracts and agreements heretofore entered into by any such receiver duly authorized by the courts by which such receiver was appointed, shall be equally binding on said bank examiner for the use and benefit of such* trust, and the bank examiner shall be deemed to be substituted for such receiver in all such contracts and agreements. For the purpose of carrying out the provisions of this section, and subject to the approval of the state banking board,*114 the bank examiner shall appoint such special deputies, clerks, assistants and attorneys as shall be deemed necessary, and fix their compensation, same to be paid out of the funds and assets of the said respective trusts for the settlement and liquidation of which such special deputies, clerks, assistants and attorneys are appointed or employed. ”
The respondent, Frank L. Wildes, as receiver of the said State Bank and Trust Company, came into possession of the said bank, and all other property thereof, under and by virtue of a judgment and decree of the First Judicial District Court of the State of Nevada, in and for Ormsby County, made on the 18th day of May, 1908, in an action brought by the State of Nevada, on the relation of the board of state bank commissioners, against the State Bank and Trust Company and the directors thereof, wherein it was adjudged that it was unsafe for the said State Bank and Trust Company to continue business, and ordered said company into involuntary liquidation, enjoined the directors of said company from transacting any of its business affairs, appointing the respondent receiver of said company, and directing the then bank examiner to deliver and surrender to said receiver all the property and effects of said defendant corporation.
The judgment and decree ordering the State Bank and Trust Company into involuntary liquidation and appointing the respondent herein as receiver was made under and by virtue of the provisions 'of section 10 of an act entitled " An act creating a board of bank commissioners, defining its duties, providing for the appointment of a bank examiner, prescribing his duties, fixing his compensation, providing penalties for the violation of the provisions of this act, and other matters relating thereto,” approved March 26, 1907 (Stats. 1907, c. 119), which ■ section, in part, reads as follows:
"Sec. 10. If the bank examiner, on the examination of the affairs of any corporation mentioned in section 4 of this act, shall find that any such corporation * * **115 is conducting business in an unsafe manner * * * or if it shall appear to said examiner that it is unsafe for any such corporation to continue to transact business, it shall be the duty of such examiner to immediately report the condition of such corporation to the bank commissioners; and if the bank commissioners, either from the report of the bank examiner, or from their own knowledge, decide that it is unsafe for any such corporation to continue to transact business, they shall authorize the bank examiner to take such control of such corporation, and of the property and effects thereof, as may be by them deemed necessary to prevent waste, or diversion of the assets, and to hold possession of the same until the order of court hereinafter mentioned, and it is hereby made the duty of the attorney-general, upon being notified by the bank commissioners, to immediately commence suit in the proper court against such corporation and the directors and trustees thereof to enjoin and prohibit them from the transaction of any further business. If upon the hearing of the case the court shall find that such corporation is solvent, and may safely continue business, it may dismiss the action, and order that the corporation be restored to the possession of the property. But if the court shall find that it is unsafe for such corporation to continue business, or that such corporation is insolvent, said court shall by its decree order such corporation into involuntary liquidation, and shall issue the injunction applied for, and shall cause the same to be served according to law, and shall order the examiner to surrender the property of the corporation in his possession to a receiver appointed by the court for the purpose of liquidation in such proceeding, under the orders and directions of the court. * * *”
That the decree ordering the State Bank and Trust Companj’ into involuntary liquidation and appointing a receiver thereof was a final judgment is conceded in this proceeding. It was treated as a final judgment by the parties to the proceeding, an appeal having been taken to this court by the defendants in the action, upon the
The respondent, in his answer, and counsel for respondent, in their brief, have attacked the banking act of 1911 as violative of the constitution, particularly section 79 thereof. It is unnecessary to consider many of the constitutional questions raised, and it would not be proper to do so, in the event any of the objections made to section 79 can be well taken. We think it unnecessary to go further than to consider the objection that the legislature is without power to modify or annul the final judgment of a court. By section 1 of article 6 of the constitution, the judicial power of the state is vested in a supreme court, district courts, justices of the peace, and such other courts as the legislature may establish for municipal purposes only in incorporated cities and towns, and by section 1 of article 3 it is provided: "The powers of the government of the State of Nevada shall be divided into three separate departments — the legislative, the executive, and the judicial; and no persons charged with the exercise of powers properly belonging to one of these departments shall exercise any functions appertaining to either of the others, except in the cases herein expressly directed or permitted. ”
By the judgment entered in the case of The State v. State Bank and Trust Company, et al., all of the property and interests of the bank were placed in the hands of the receiver, for the purpose of liquidation in such proceeding, under the orders and directions of the court. (Section 10, Stats. 1907, p. 232.)
The appointment of the receiver and his investiture of the property of the bank, for the purpose of liquidation, under the orders and direction of the court, became a part of the judgment. It is well settled that an attempt upon the part of the legislature to vacate or modify the conditions of an existing judgment is beyond its constitutional powers, and that an enactment attempting such
In Martin v. South Salem Land Co., supra, the court said: "The legislature, within certain limitations, may alter or control remedies by which litigants ascertain their rights in the courts; but, when the litigation has proceeded to judgment and decree upon the merits of the controversy, it has passed beyond its power. ”
The judgment ordering the State Bank and Trust Company into involuntary liquidation, and ordering its property and interests out of the control and management of the board of directors and into the hands of the receiver, vested in the receiver the control and disposition of the property, subject to the orders of the court, for the benefit of the creditors and stockholders of the company. The right to have the property of the corporation administered in accordance with the provisions of the judgment and the statute upon which it was based is a right of property which the legislature is without power to disturb. (Gilman v. Tucker, 128 N. Y. 190, 28 N. E. 1040, 13 L. R. A. 304, 26 Am. St. Rep. 464; Bates v. Kimball, 2 D. Chip. (Vt.) 77; Strafford v. Sharon, 61 Vt. 126, 17 Atl. 793, 18 Atl. 308, 4 L. R. A. 499; Searcy v. Turnpike Co., 79 Ind. 274; Taylor v. Place, 4 R. I. 324; People v. Supervisors, 26 Mich. 22; U. S. v. Peters, Judge, 5 Cranch, 115, 3 L. Ed. 53; McCullough v. Virginia, 172 U. S. 102, 19 Sup. Ct. 134, 43 L. Ed. 382; Memphis v. U. S., 97 U. S. 293, 24 L. Ed. 920.)
In McCullough v. Virginia, supra, the court, by Brewer, J., said: "But there are more substantial reasons than this for not entering this motion. At the time the judgment was entered in the circuit court of the city of Nor
In Gilman v. Tucker, supra, Ruger, C. J., delivering the opinion of the court, said: "We must bear in mind that a judgment has been rendered, and the rights flowing from it have passed beyond the legislative power, either directly or indirectly, to reach or destroy. After adjudication the fruits of the judgment become rights of property. These rights became vested by the action of the court, and were thereby placed beyond the reach of legislative power to affect.”
The receiver is "the officer or agent of the court from which he derives his appointment; his possession is exclusively the possession of the court; the property being regarded as in the custody of the law, in gremio legis, for the benefit of whoever may be ultimately determined to be entitled thereto. * * * And, since the possession of a receiver is that of a court, it is held that a change in the receiver does not have the effect of interrupting that possession.” (High on Receivers, 4th ed. sec. 134.) It is manifest, however, from a reading of section 79, supra, of the act of 1911, that something more than a mere change of receivers is sought to be accomplished thereby, for the property of the bank would be taken out of the direction and control of the court entirely, and it would cease to be in the custody of the law. The change would be from the custody of the court to the custody of an executive officer.
Suppose the next legislature should repeal the act of 1911, and the office of bank examiner be terminated, what would then be the status of the control and possession of the bank? The receiver has wound up his affairs and has been discharged. The directors of the bank are enjoined from assuming any control of the property. In such a case it would appear to us that the only course that could be pursued would be another application to the court for the appointment of another receiver under the general equity powers of the court. The legislature
In Memphis v. U. S., supra, the Supreme Court of the United States quotes the following extract from Fisher’s Negroes v. Dabbs, 6 Yerg. (Tenn.) 119: "A distinction between the right and the remedy is made and exists. But where the remedy has attached itself to the right, and is being prosecuted by due course of law, to separate between them and take away the remedy is to do violence to the right and comes within the reason of that provision of our constitution which prohibits retrospective, or, in other words retroactive, laws from being passed, or laws impairing the obligation of contracts. ”
As before pointed out, section 79, supra, by mere force of its own provisions, transfers possession of the property of the bank out of the custody of the receiver and the possession and authority of the court, without notice, order, or any hearing whatever. The legislature might have directed that the bank examiner apply to the court to be substituted as receiver of any bank theretofore by decree ordered into involuntary liquidation, and the court doubtless would have the power to make the substitution, whether it could be compelled to accept a receiver designated by the legislature or not, for carrying into effect its judgment previously entered — questions we are not now called upon to consider. But if this were the provisions of the statute it would have contemplated notice and hearing, when all parties interested would have a right to be heard. We need not determine whether the legislature has authority under its police power, as a mat
A few states have statutes of this kind, but thus far they have not been brought into question. All of these, we believe, however, have provisions authorizing the owners or directors of the bank to institute proceedings to enjoin the bank commissioners or examiner from proceeding when the question of the insolvency of the bank can be judicially determined, and this may be a sufficient saving clause to relieve such a statute from the objection that it is a deprivation of due process of law. But even that is not the case here. The State Bank and Trust Company has been adjudicated to be insolvent, or, what in its case was practically the same thing, ordered into involuntary liquidation. Banks that have already, by final judgment, been placed in the hands of a receiver for liquidation cannot by any reasonable hypothesis be said to continue to be subject to future regulation under the police power of the legislature, such that the possession and control of the court can be ousted and an executive officer substituted therefor by the mere fiat of the legislature.
In Hettel v. District Court, 30 Nev. 382, 133 Am. St. Rep. 730, we annulled on certiorari an order of court appointing a receiver for a corporation and restraining its directors from exercising their powers of control over its affairs made ex parte, under the provisions of section
In Golden v. District Court, 31 Nev. 250, relative to a similar question, we said: "Considering the foregoing section in the recent case of Hettel v. First District Court, 30 Nev. 382, 133 Am. St. Rep. 730, we said: 'The foregoing section provides for a number of situations, the existence of any of which would authorize the court to make an order appointing a receiver and dissolving the corporation. The corporation in the present instance is sought to be dissolved, and a receiver appointed, upon the ground that "its assets are in danger of waste through attachment and litigation.” Manifestly the corporation, its officers and stockholders, are interested in any such proceeding. The statute makes no provision for the procedure to be followed to obtain such order. For the holder or holders of one-tenth, or any other interest, of the capital stock of a corporation, to be able to secure an order of dissolution, and as a result of such order place the corporation in the hands of a receiver upon the mere application for such order without notice or hearing, could not, we think, be sustained, even though an attempt to confer such authority upon a court by statute were made. (10 Cyc. 1309; Wright v. Cradlebaugh, 3 Nev. 349; People v. Seneca Lake Co., 52 Hun, 174, 5 N. Y. Supp. 136; Crowder v. Moone, 52 Ala. 220.) But the section of the statute in question does not confer such authority upon a court. It simply provides that a holder or holders of one-tenth of the capital stock may apply to the district court for such an order. The statute must be construed, if possible, to give it force and effect. It cannot have effect unless such an order can be made only upon a showing after all parties interested have had an opportunity to be heard. ’ ”
In the Golden case we also quoted the following from People v. O’Brien, 111 N. Y. 1, 18 N. E. 692, 2 L. R. A. 255, 7 Am. St. Rep. 684: "But an objection to this act even
We see no less reason for holding that the legislature cannot, by mere force-of legislative enactment, take property which has by due process of law become vested in a court for purposes of distribution to those lawfully entitled to it, and vest it in another for the same purpose, than in any other case where vested rights have been so attempted to be changed; but, upon the contrary, there is additional reason why it cannot be done, for it is an attempted infringment upon the functions of the judicial branch of government. In Lincoln v. Alexander, 52 Cal. 482, 28 Am. Rep. 639, cited supra, the Supreme Court of California (quoting from the syllabus), held: "The guardian of a minor’s estate has an authority coupled with an interest in the estate, not a bare authority. Where a duly qualified and acting statutory guardian has charge of a minor’s estate, the legislature cannot by special act
Whether or not the State Bank and Trust Company could be wound up more advantageously to the depositors and stockholders under the direction and control of the state bank examiner, rather than the receiver, who has had three years in which to study its conditions and become acquainted with its affairs, is not a question involved in this proceeding. If we were not here dealing with a final decree, which has passed beyond the power of the legislature to modify or annul, and conceding, for the purposes of the case, that there was no other constitutional impediment, it would then be a question of wisdom and policy for the legislature, with which courts have nothing to do. This character of legislation, however, presents a question worthy of consideration, though the question be not strictly a legal one. The enactment, or attempted enactment, of legislation doing away with receiverships doubtless has come about through the failure in some instances of the courts themselves to perform their full duty in the matter of the winding up of insolvent estates.
Some of the criticism that has been made and is being made throughout this country, relative to the delay and expense involved in receiverships, is doubtless based upon substantial grounds, while much of it is without real merit. What there is of merit in the matter of complaints, as to undue expense and delay in receiverships, courts themselves must ascertain, and apply the cure. The law of receiverships is well settled, and we think it may be conceded that the fault does not lie with the law itself, but in its application in individual cases. In every case of receivership the responsibility must largely rest upon the individual judge and his appointee, the receiver, as to whether the estate has been closed with due regard' to time and expense. The law itself does not tolerate undue delay or unreasonable expense in receiverships, and in cases where there has been such the fault has
We are speaking very generally, and what we have said is directed to no specific case; and, in recognizing that there are to be found cases where receiverships have failed in the execution of the trust, we do not wish to be understood as in anyway conceding that the law of receiv-erships is inherently defective. The power vested in the courts to appoint receivers is one of the most beneficent in our whole system of jurisprudence, but, like every other power for good, individual cases may be found where the power may have been abused.. But if we concede that individual cases may be found where this power has not been properly exercised, does it follow that the legislative or executive branch of government is better qualified to assume the exercise of this great power of administering the property of others, than is the judicial branch of government? To admit such a proposition is to admit that our system of government is a failure. That, as a general system of law, the idea that an executive officer, independent of judicial control, can better administer large estates, which are the property of others, than can be done through the agency of the courts, is preposterous. That in a specific case a thoroughly competent executive officer would do better than an incompetent appointee of a court, not removed, goes without saying; but we are not considering individual cases, but a general system.
The whole proposition, however, is beyond the realm of controversy, for the constitution determines that there shall be three separate, coordinate branches of government, the legislative, executive, and judicial, and that neither branch shall perform functions that essentially belong to one of the other branches. The appointment of receivers and the winding up of insolvent corporations are judicial in nature, and are functions of the judicial branch of government, and not of the executive or legislative, further than the latter may prescribe procedure.
As before stated in this opinion, the legislature may,
Our attention has been called to the fact that section 79 is the last section of the act following sections which contain provisions for the repeal of acts in conflict, and making an appropriation for carrying it into effect, as indicative that said section was not within the original contemplation of the framers of the act, but was subsequently added as an afterthought. While, if this were the fact, the section would not, for that reason, be vitiated; it may afford some indication that this section was subsequently added to the pending bill as an amendment and passed without the usual opportunity for examination and consideration by the legislature or public, and thus its unconstitutional features may have escaped detection by the legislature.
As we are of the opinion that section 79, supra, is manifestly unconstitutional and void, it follows that the application for mandamus must be dismissed.
It is so ordered.
Rehearing
On Petition for Rehearing
The petition for a rehearing is denied.