State Ex Rel. Dunbar v. Superior Court

297 P. 774, 161 Wash. 550

• Court: Washington Supreme Court
• Decided: April 2, 1931
• Docket: Nos. 23089, 23110, 23111. En Banc.
• Status: Published

Opinions

Tolman, C. J.

Cause No. 23089 is a petition for a writ of review; in cause No. 23110, the relator likewise seeks a writ of review; and in cause No. 23111, a writ of prohibition is sought. All of these actions grow out of one proceeding now pending in the superior court, and, counsel consenting, this court has ordered that they be consolidated, to the end that the three questions raised be all disposed of at one time and in one opinion.

It appears that on. February 28, 1931, the Attorney General, proceeding under § 13, chapter 169, Laws of 1919, p. 505, as modified by a later act, filed his complaint in the superior court, seeking the appointment of a receiver for the Puget Sound Savings and Loan Association, and asking that H. C. Johnson, director of efficiency, be so appointed. The court, in due time and course, as requested, appointed “Harry C. Johnson, the director of efficiency of the state of Washington,” as permanent receiver of the corporation involved.

In the order dated March 3, 1931, appointing the receiver, was incorporated, “It is further ordered that Caldwell & Lycette be and they are hereby appointed attorneys for the receiver.” This last quoted provision of the order presents the sole question which the Attorney General seeks to have reviewed.

Thereafter, and on March 13, 1931, the respondent judge made and entered an order in the cause, removing relator Johnson as receiver and appointing one H. J. Hoffman, then the state supervisor of savings and loan associations of this state, as temporary receiver and liquidator of the corporation; and, on the same day, made and entered an order appointing the firm of Caldwell & Lycette as attorneys for the temporary receiver. It is this order of removal'which is attacked by the relator Johnson in his application for a writ of prohibition.

Prior to his removal as receiver, the relator Johnson moved in the court below for the vacation of the order appointing attorneys for the receiver, and asked leave of the court to select and employ his own counsel. This application was denied, and primarily it is that ruling which is sought to be reviewed in the third proceeding filed here.

The entire record has been certified to this court, and thus the three questions are now before us for decision.

By reason of the press of time and lack of decided cases applicable, we cannot now as adequately discuss these questions as we would like; but a majority of the court being clear as to the results which must be reached, we hasten to express our views as clearly as may be, in order that the liquidation of the corporation involved may proceed in a prompt and orderly manner, to the end that the best possible results to depositors and creditors be obtained.

The first and most far-reaching question, and the one which we think controls all of the other questions in the case, is as to the nature of the receivership of savings and loan associations under our statute. Is it a strictly statutory receivership in which the court participates only for the purpose of determining judicially that an unsound condition exists, and, having so determined, further proceedings are wholly in the hands of the director of efficiency? Or, the statute providing when and how a receiver may be appointed and stopping there, does it follow that the court acts judicially in appointing the receiver, retains jurisdiction of the trust, and the receiver appointed becomes the arm of the court appointing him and must proceed like any other chancery receiver, subject to the direction and control of the court so long as he continues to act?

Chapter 169 of the Laws of 1919, p. 494, names the state auditor as the person in charge of savings and loan associations, but by § 8, Laws of 1925, Ex. Ses., p. 406; Rem. 1927 Sup., § 3735%, the director of efficiency was substituted for the state auditor; so that, reading “director of efficiency” in the place of “state auditor,” as the modifying law requires, the only stat ute touching the question we are now considering is the latter part of § 13, chapter 169, Laws of 1919, p. 505, which reads:

“Meanwhile, the auditor shall remain in charge of the books, records and assets of every description of such association, attend or be represented at all directors’ and stockholders’ meetings held, suggest such steps as he may deem necessary to restore such association to a sound condition; and if same is not done within the 20 days allowed by the statute he shall report the facts to the attorney general and it shall thereupon become the duty of the attorney general to institute proceedings in the superior court of the proper county for the appointment of the state auditor as receiver and for the dissolution of such association, or such other proceedings as the occasion may require. ’ ’

Since time immemorial, courts of equity, under the common law, have had exclusive jurisdiction of causes seeking the appointment of receivers, and any statute designed to oust the courts of their jurisdiction would be in derogation of the common law and therefore to be strictly construed. Or, if this be questioned, then since 1854, by statute, Rem. Comp. Stat., § 741, the superior court has had the exclusive authority to appoint a receiver for, and to wind up the affairs of, a corporation which is in danger of insolvency, or which has forfeited its corporate rights. Since repeals by implication are not favored, it must be held that the act now under consideration in no part repeals or modifies the pre-existing statute.

Does the act of 1919 create a statutory receiver? There is nothing in the language used, and nothing necessarily impiled, which so indicates. Had the legislature such an idea in mind, a simple added phrase to the effect that the receiver, when appointed, should proceed to liquidate the affairs of the corporation, under the terms of the statutes relating to insolvent banks, without the further intervention of the court, or anything which would limit the jurisdiction of the court to the necessary findings of fact and the appointment only of the receiver, would have sufficed. But, instead of so limiting the court, the statute limits only the executive branch by authorizing the director of efficiency to remain in charge only until a receiver is appointed, and by authorizing the Attorney General only to initiate the proceedings for the appointment of the receiver and the dissolution of the corporation, thus leaving untouched and wholly unimpaired the jurisdiction of the court which the Attorney General is directed to invite.

Having so brought the matter into court, and given the court jurisdiction of the subject-matter, the only possible inference left is that the legislature intended that the court should continue to exercise its general and well-recognized jurisdiction, without any statutory limitation, until all matters involved in the liquidation were completed. That this is the only possible conclusion, is fortified by the fact that the statute supplies no machinery for, or authority in, the receiver, to proceed by so much as a single step with the liquidation, without the direction and authority of the court. Without such machinery or authority, how could the receiver fix a time limiting the presentation of claims, or rule that any claim was barred because not timely or properly presented? How pass upon or allow or disallow any claim?

In fact, it would appear that if the receiver were a statutory one, as contended, he could hardly take a single step of any kind without inviting actions innumerable to restrain, overrule, or set aside the act done; and a failure on his part to act would have the same result. So that, instead of an orderly proceeding under the control and direction of the court at every step, we would have a disorderly proceeding, with a multiplicity of independent suits, by which the parties interested would seek control of a court of competent jurisdiction in the matters attending the liquidation.

If, then, as we now hold, the receiver, when appointed, becomes the ordinary chancery receiver and an arm of the court which appointed him, and subject at all times to the control and direction of the court, then it is immaterial for present purposes whether or no it is the mandatory duty of the court to appoint only the director of efficiency as receiver. The trial court did so appoint, and, immediately upon the appointment becoming effective, so far as this trust is concerned, the director of efficiency ceased to exist, and in his place and stead was a chancery receiver, the creature of the court.

That being so, it is at once apparent that, whatever the duties and privileges of the Attorney General with respect to being the adviser and counselor and attorney for the state officers and other departments of the state government, he had no such duties with respect to a chancery receiver appointed by a court of competent jurisdiction; and both under the letter and the spirit of the statute, and under the common law, the rights and duties of the Attorney General ended when the director of efficiency, by qualifying as a receiver, ended his connection with these affairs as an officer of the state, and assumed the duties of an officer of the court. We are satisfied thdt there was no error in refusing to name the Attorney General as the attorney for the receiver.

There seem to be no decided authorities touching upon this question which we have been discussing, which are of any aid or assistance, and we must therefore depend in the main upon reason for our support. However, the supreme court of New Mexico, iu the case of State ex rel. Read v. Ryan, 27 N. M. 651, 204 Pac. 68, had under consideration a statute which is quoted in the opinion, and from which we quote:

“Upon taking charge of any bank, the state bank examiner shall, as soon as possible, ascertain by a thorough examination of its affairs its actual condition, and if he shall become satisfied that such bank cannot resume business or liquidate its indebtedness to the satisfaction of all of its creditors, he shall make a full and complete report of such examination and his opinion to the Attorney General who shall institute, forthwith, proper proceedings in the proper court for the purpose of having the state bank examiner appointed as receiver to take charge of such bank and wind up its affairs and the business thereof for the benefit of its depositors, creditors and stockholders. Such proceedings shall be governed by the provisions of the general incorporation laws for the winding up of insolvent corporations. . . . ”

It will be seen that, with reference to the appointment of a receiver, this statute is identical with our own; but, in providing that the receiver proceed under the provisions of the general incorporation laws for the winding up of insolvent corporations, the statute seems to furnish the machinery and authority by which a statutory receiver might act; and yet, notwithstanding this marked difference in the statute, the court said:

“The bank examiner is not by statute made receiver of insolvent banks, as he is in some jurisdictions, nor is he a receiver for an insolvent bank appointed by the executive department. Under this statute he applies to the court to be appointed receiver, and is not in any better position by virtue of his office as state bank examiner than any other applicant. We hold that, had the' legislature intended the state bank examiner should be receiver of insolvent banks,- it would have so provided, and a different question as to the constitutionality of such act might arise. But the statute does not so provide. It requires the Attorney General to institute proper proceedings for the purpose of having the bank examiner appointed as receiver. The act does not attempt to control the discretion of the court in appointing a receiver, and under it the court may appoint or refuse to appoint the applicant as receiver.

“Whether the appointment of a receiver is a judicial act and is not within the constitutional power of the executive or legislative departments we do not decide, but hold in this case that the act which we are considering does not attempt to control the judicial discretion, nor encroach upon the judicial department of the state, but leaves the court free to act upon application of the bank examiner. ’ ’

We express neither approval nor disapproval of what was decided by the New Mexico court. As we have already seen, the question of whether our statute makes mandatory the appointment of the director of efficiency as receiver is not before us and is not now decided; but the argument quoted, applied to the question which is before us, seems to lend support to our reasoning.

The case of Union Savings & Investment Co. v. District Court of Salt Lake County, 44 Utah 397, 140 Pac. 221, relied upon by amici curiae, is based upon a statute so different from ours as to render it of little aid here, and we think it unnecessary to analyze this or any other of the numerous authorities cited, all of which have been carefully considered.

With the foregoing as a premise, and in logical sequence, we now approach the question of the rights and duties of a duly qualified chancery receiver in charge of the liquidation of a corporation, and the power of the court over him. Eelator Johnson complains of the portion of the order first made naming the attorneys to work with, and to serve him, and fur ther complains that the court refused to vacate that order and to grant him leave to select his own attorneys.

If we assume that he may raise these questions, the answer is found in the well-settled law relating to the control of a chancery court over a receiver appointed by it. Our statute, Rem. Comp. Stat., § 52, gives the superior court power, in subdiv. 5:

“To control, in furtherance of justice, the conduct of its ministerial officers, and of all other persons in any manner connected with a judicial proceeding before it, in every matter appertaining thereto; . . .”

In Willett & Oleson v. Janecke, 85 Wash. 654, 149 Pac. 17, we have defined a receiver as the representative of the court, subject wholly to its orders and accountable to it. The spirit of what is there said is controlling here.

See, also, Interstate Refineries v. Barry, 7 Fed. (2d) 548; Empire Trust Co. v. Aubrey, 254 Fed. 281.

. The trial court did not err in anything done in this respect.

Still bearing in mind that we have determined that, on appointment, relator Johnson became an ordinary receiver in chancery, the next question is: Did the court err in removing the receiver whom he had appointed, and may the receiver raise that question? Of course, the relator Johnson has a right to raise the question of statutory construction considered first herein, but, that question being decided against him, he is subject to the general rule and he concedes that rule.

In State ex rel. Casedy v. Inter-State Fisheries Co., 36 Wash. 80, 78 Pac. 202, this court had before it an application for a writ of review questioning the order of the trial court in removing a receiver who had been appointed by that court. Judge Fullerton, speaking for the court, said:

“We are of the opinion that no cause for issuing the writ is shown. No matter how much the receiver may feel aggrieved at the action of the court in removing him, he individually cannot complain. A party to the action has an interest in the personnel of the receiver, and it might be that, if the court should arbitrarily remove one and appoint another, he could have the orders reviewed in some way, but no such right belongs to the receiver. He may have orders relating to his compensation, his accounts, or Ms acts while receiver, reviewed, when he is aggrieved by such orders, but whether he personally shall or shall not continue as receiver is a question he has no right to litigate. ’ ’

This is the general rule and is not seriously questioned by anyone, and we cite but a few of the many authorities. Clark on Receivers (2d ed.), vol. 1, § 692 (a); 23 R. C. L., p. 133, § 141.

From what we have said, it follows that the trial court did not err in any of the orders which are here for review, and that no ground exists for the issuance of a writ of prohibition.

It is therefore the order of the court that the various rulings of the trial court here reviewed are affirmed, that the alternative writ of prohibition is quashed, and the permanent writ is denied.

Parker, Main, Beals, and Mitchell, JJ., concur.