State Board of Insurance v. Betts
State Board of Insurance v. Honorable Chas. O. Betts, Judge of the District Court of Travis County, Texas, 98th Judicial District, and v. F. Taylor
Opinion of the Court
Mr. Justice Norvell
delivered the opinion of the Court.
This is an original action in mandamus brought by the relators, State Board of Insurance and the Insurance Commissioner, against respondents, Honorable Chas. 0. Betts, Judge of the District Court of Travis County, Texas, 98th Judicial District, and V. F. Taylor, having for its purpose the expunging from the records of said District Court those orders entered by respondent Betts on June 10, 1958 in some 21 insurance company receivership cases pending in said court, wherein the respondent V. F. Taylor was appointed as receiver for the insurance companies involved in such liquidation proceedings.
It is the contention of the Attorney General, as the legal representative of the State Board and its Comissioner, that such orders are void because they contravene the expressed will of the Legislature as set forth in a legally adopted constitutional statute. We think this contention must be sustained. It is a generally accepted premise that the failure of a court to observe a mandatory statutory provision conferring a right or forbidding particular action will render its order or judgment void. Cline v. Niblo, 117 Texas 474 , 8 S.W. 2d 633 , 66 A.L.R. 916 ; 25 Texas Jur. 802, Judgments Sec. 306.
The controlling question in this case is whether or not the *614 statutory provision that the liquidator designated by the Insurance Commissioner shall be the receiver in the liquidation pro-ceding before a court is mandatory or merely directory. A brief statement from the record taken in connection with the wording of the statute will serve to present the issue.
On January 7, 1958 William A. Harrison designated C. H. Langdeau to serve as liquidator in the event a vacancy should occur in that office. On June 9, 1958 Harrison dismissed J. M. Williamson whom he had theretofore designated as liquidator and re-affirmed his previous order designating Langdeau as liquidator. Consequently on June 9, 1958 Langdeau was the legally and duly appointed liquidator under the provisions of Article 21.28, Vernon’s Ann. Texas Insurance Code. Section 2(a) of the article mentioned provides that:
“Whenever under the law of this State a court of competent jurisdiction finds that a receiver should take charge of the assets of an insurer domiciled in this State, the liquidator designated by the Board of Insurance Commissioners as hereinafter provided for shall be such receiver. The liquidator so appointed receiver shall forthwith take possession of the assets of such insurer and deal with the same in his own name as receiver or in the name of the insurer as the court may direct.” (Under the 1957 amendment to the Code the duty of designating a liquidator devolves upon the Insurance Commissioner. Senate Bill 222, Acts 1957, 55th Leg., ch. 499, p. 1454, Article 1.02(b) Vernon’s Ann. Texas Ins. Code.)
On June 10, 1958 the respondent Betts entered the order now in dispute. While the other district judges in Travis County, upon Williamson’s dismissal, designated the new liquidator Langdeau to act as receiver in their respective courts, Judge Betts designated the respondent Taylor to serve in the 98th District Court despite the terms of Article 21.28 of the Insurance Code. This squarely raises the question of whether the provisions of Article 21.28, Sec. 2(a), above set out, are mandatory or merely directory. This was the issue intended to be raised and which was raised by Judge Betts for his order which after removing Williamson as receiver, provided that:
“It appearing to this Court that an urgent and imperative necessity for the continuance of this Receivership exists and for this Court to appoint a proper Receiver to continue to act under this Court’s jurisdiction, and it further appearing to the Court that this Court has the exclusive power and 'duty to ap *615 point a duly qualified person as Receiver, irrespective of the directory provisions of Article 21.28 of the Texas Insurance Code, 1951, as amended, that the Liquidator appointed by the State Board of Insurance be the Receiver; and the Court finds that V. F. Taylor, a practicing and duly qualified attorney before the State Bar of Texas and a citizen of this County and State, is duly and properly qualified to be Receiver in this Receivership Estate, and the Court finds that it is to the best interests of this Receivership Estate, its claimants, creditors, policy holders and stockholders that the said V. F. Taylor should be appointed immediately. * *
In his answer filed herein the respondent Betts states his position as follows:
“It is the specific position of this Respondent that Article 21.28 of the Insurance Code is directory and not mandatory, wherein it provides for the appointment of the liquidator of the State Board of Insurance as Receiver in receivership cases, and it is the specific position of this Respondent that the Court has the power to appoint attorneys and fix their compensation.”
While as pointed out therein the issue of a district judge’s authority to appoint someone other than the liquidator as receiver was not squarely before us, the opinion rendered by us in the former case of State Board of Insurance v. Betts, District Judge, this volume 83, 308 S.W. 2d 846 was to the effect that Article 21.28, Sec. 2(a) was more than a mere directory statute. The argument that the statute is directory rather than mandatory involves a constitutional point. Th Legislature used the word “shall” which has a clear mandatory connotation. It is urged however that unless the word “shall” be given a permissive rather than a mandatory meaning the statutory section would have to be declared unconstitutional as an unwarranted infringement upon the judicial power and hence contrary to the provisions of Article 2, Sec. 1 of the Texas Constitution relating to the separation of governmental powers. It is concededly a serious matter to strike down duly enacted legislation as being unconstitutional. It is perhaps an equally serious matter to hold that the Legislature did not mean what it said. The problem of statutory construction is to ascertain the intent of the Legislature. When we abandon the plain meaning of words, statutory construction rests upon insecure and obscure foundations at best. It should perhaps be reiterated that Courts have no concern with the wisdom of legislative acts, but it is our plain duty to give effect to the stated purpose or plan of the Legislature, although to us it may seem ill advised or im *616 practicable. Western Public Service Co. v. Meharg, 116 Texas 193 , 288 S.W. 141 , on rehearing, 116 Texas 193 , 292 S.W. 168 ; Easterline v. Bean, 121 Texas 327 , 49 S.W. 2d 427 ; City of San Antonio v. Handley, Texas Civ. App., 308 S.W. 2d 608 , wr. ref.; City of Abilene v. Meek, Texas Civ. App., 311 S.W. 2d 654 , wr. ref.; 39 Texas Jur. 162, Statutes, Sec. 89. At the time of our former decision we were of the opinion that the wording of Article 21.28, Sec. 2(a) cannot be construed as being directory only without doing unwarranted violence to the language employed by the Legislature. We hold that this section of the Code (Art. 21.28, Sec. 2(a) ) is not directory and that it is not unconstitutional upon the ground urged against it. State Board of Insurance v. Betts, this volume 83, 308 S.W. 2d 846 . It follows that the respondent district judge did not possess “the exclusive power and duty to appoint a duly qualified person as Receiver, irrespective of the * * * provisions of Article 21.28 of the Texas Insurance Code. * * *”
It is recognized that this Court’s power or control over the orders of a district or county court is extremely limited. We have no general supervisory authority over proceedings pending in trial courts. Since our jurisdiction is primarily appellate, the correction of errors made in the course of a trial or other proceedings must, as a general thing, await the entry of a final judgment or concluding decree. A well settled exception to this general rule is that which permits this Court through an exercise of its original jurisdiction to order a trial court to vacate a void order and expunge the same from its records. State v. Ferguson, 133 Texas 61 , 125 S.W. 2d 272 ; State Board of Insurance v. Betts, this Volume 83, 308 S.W. 2d 846 .
The distinction between a void order and one which is merely voidable or erroneous may often present a question difficult of solution. We have come to the conclusion, however, that the orders of June 10, 1958 insofar as they purport to appoint V. F. Taylor as receiver as void because they are in contravention of a valid statutory enactment.
Most of the Texas cases dealing with an order entered during the course of an administration, but which is either unauthorized by or prohibited by a statutory enactment are those relating to estates of decedents or guardianships. These proceedings are the most common of the type which remain pending in our courts over a considerable period of time and in which orders of various kinds are entered as occasion requires. The analogy *617 between such proceedings and receivership cases is readily apparent. •
In Cline v. Niblo, 117 Texas 474 , 8 S.W. 2d 633, 638 , 66 A.L.R. 916 , Chief Justice Cureton writing for the Court quoted with approval the following excerpt from Freeman on Judgments, 5th ed. Sec. 354, with the emphasis indicated by italics, viz:
“This well-established doctrine, that a judgment beyond the court’s power is invalid, is not limited in its application to any particular kind of judgment nor is it peculiar to the judgments of any particular court. Irrespective of the character or dignity of the tribunal pronouncing the decision, whether of inferior, limited or superior general jurisdiction, it must confine its determination within the authority it possesses under the law and the case. If the court is exercising special statutory powers the measure of its authority is the statute itself, and a judgment in excess thereof is null and void and subject to collateral attack, a rule which finds frequent application in the case of probate judgments.”
See also Withers v. Patterson, 27 Texas 491 ; Johnson v. Hampton, 117 Texas 580 , 8 S.W. 2d 640 ; Easterline v. Bean, 121 Texas 327 , 49 S.W. 2d 427 ; Grant v. Ellis, Texas Com. App., 50 S.W. 2d 1093 ; 25 Texas Jur., 822, Judgments Sec. 306.
Both respondents have filed answers herein which contain numerous allegations which are hardly pertinent to the issue before us and were excepted to by relators for that reason. These answers detail at some length the difficulties which the respondent Betts * * * had with the Board of Insurance Commissioners which preceded the present State Board of Insurance. Reference is likewise made to certain testimony adduced Such answers also allege various failures in proper administration which are charged to liquidators who are no longer employed by the Insurance Commissioner or the Board of Insurance. Reference is likewise made to certain testimony adduced at a hearing held by Judge Betts apparently to determine the existence or extent of rumored friction among employees in the liquidation division of the Insurance Department. We are also referred to accounts of conversations between the Insurance Commissioner and the respondent District Judge. It perhaps can be said that the intent of these allegations is to justify the appointment of Taylor as receiver upon the theory that the Board of Insurance and the Insurance Commissioner has been *618 guilty of nonfeasance or misfeasance which would authorize action on the part of the District Judge.
In our former opinion (this volume 83, 308 S.W. 2d 846 ) we upheld the District Judge’s action in appointing Renne All-red, Jr. as attorney for the liquidator-receiver despite the provisions of Article 21.28, Sec. 12(b) of the Insurance Code which places the power to appoint and fix the compensation of the liquidator, special deputy liquidator, counsel, clerks and assistants with the Board of Insurance and the Insurance Commissioner because of a nonperformance on the part of the Board and Commissioner in failing to designate an attorney to succeed Emmett Shelton, who, on January 8, 1957, resigned the position to which Allred was subsequently appointed. We held that in view of the extensive powers vested in the district judge by statute, which were reviewed in some detail, he was authorized to appoint an attorney considering the inaction on the part of the Board and Commissioner. We said:
“In our opinion the Texas statute does not vest the State Board and its Commissioner with the sole and exclusive power to appoint counsel under any and all conditions. Once liquidation has begun, the court is not rendered powerless to carry out its heavy responsibilities by a nonperformance or misperformance on the part of the Board or its Commisisoner.”
In this case there has been no nonperformance on the part of the Board or the Commissioner. There has been no vacancy in the office or position of liquidator. Langdeau became liquidator immediately upon the dismissal of Williamson. Likewise there has been no misperformance on the part of the Board or Commissioner which would justify the District Judge’s action in disregarding the statutory mandate which says that the duly appointed liquidator shall act as receiver. The present Board and Commissioner cannot be charged with the alleged derelictions set out in respondents’ answers which are charged against precedessor boards that no longer exist. The circumstance that the services of prior liquidators serving under the present Board and Commissioner may not have been unsatisfactory to relators does not deprive them of authority to designate another liquidator nor does it support the District Judge’s refusal to recognize such action. Despite the Insurance Commissioner’s appointment of Langdeau it seems to be asserted that the Commissioner does not consider him competent because in a disputed conversation with the District Judge, the Commissioner is said to have commented upon Langdeau’s supposed lack of executive ability. *619 (It should perhaps be stated that the Commissioner denies that such inference could properly be drawn from the conversation in question.) However, the statute does not require that the Commissioner appoint that person whom the District Judge should deem the best qualified of all those available for selection. Langdeau has not yet been tried and found wanting, but if for the sake of argument it could be said that he was not a suitable person and his designation constitutes a misperformance on the part of the Commissioner, this, in the absence of the Commissioner’s failure to act, could not operate to transfer the appointive power from the Commissioner to the District Judge. We are not concerned here with a simple rejection of the Commissioner’s appointee but rather with a rejection coupled with an assertion of a right to designate some person other than the liquidator as receiver despite the provisions of Article 21.28, Sec. 2(a) of the Insurance Code.
This brings us back to the fundamental proposition asserted by the respondents, i.e., that the provisions of the article are directory only. This contention is rejected for the reasons heretofore stated.
The orders of June 10, 1958 insofar as they appoint the respondent Taylor receiver in the insurance company liquidation cases pending in the 98th District Court are void. We assume the respondent District Judge will so treat them and expunge them from the records of said Court. Otherwise the writ of mandamus will issue as prayed for. No motion for rehearing will be entertained. Rule 515, Texas Rules of Civil Procedure.
The Writ of mandamus is conditionally granted.
Opinion delivered July 16, 1958.
Concurrence
Mr. Justice Calvert
concurring.
I agree to the judgment entered in this case.
Inasmuch as I have filed a dissent in Cause No. A-6870, this day decided, [Post p. 630] it is perhaps appropriate for me to point out the features which appear to me to distinguish this case from that one.
1. This case does not involve the power of the district court to revise an order of the State Board of Insurance purporting to control the disposition of assets of an insurance *620 receivership which are specifically committed by Article 21.28, Texas Insurance Code, to the custody of the court.
2. The District Judge undertook by his order under attack in this case to exercise an original power of appointment of a person, other than the liquidator selected by the State Board of Insurance, as receiver, contrary to the provisions of Article 21.28. The order entered by the District Judge does not purport to emanate from his supervisory power to reject an unsuitable person selected as liquidator by the Board. I do not regard the statutory provision directing that the liquidator selected by the Board shall be appointed receiver as per se an interference with the effective exercise of the court’s supervisory power. See, State Board of Insurance v. Chas. O. Betts, this volume 83, 308 S.W. 2d 846, 851 .
Opinion delivered July 16, 1958.
Concurrence
Mr. Justice Smith
concurring.
This concurring opinion is written if for no other reason than to make clear the present position of the writer as to some phases of the parent case of State Board of Insurance v. Betts, this volume 83, 308 S.W. 2d 846 . The paramount reason is to point out that in my opinion the public interest would be best served if this Court would voluntarily admit that some expressions in that case need to be overruled. I am in favor of holding that the orders in the present cases are void and in doing so I favor retreating from the holding in the former case which permits the District Court to act in a situation where the statute (Art. 21.28) places the exclusive discretionary power in the State Board of Insurance and the Commissioner of Insurance. The basic question in the former case and the present cases is whether the orders of Respondent Betts are void or merely erroneous. It is my opinion that the Respondent Betts has no authority to act by fiat in exercising his judicial powers under Article 21.28, Vernon’s Annotated Civil Statutes. The respondent should be caused to realize that he can only act judicially. Article 21.28, supra, is constitutional, and it is clear to me that it was the intention of the Legislature to vest in the relators the exclusive administrative power of liquidation of insurance companies. This being true, the order in Cause No. A-6870, this volume 624, 315 S.W. 2d 286 increasing the salaries of three attorneys for the liquidator- *621 receiver, and the order in Cause No. A-6901, appointing V. F. Taylor as receiver in the receivership cases pending in the 98th District Court, are void. In my opinion, this should be declared the law even in a situation such as existed in the former case.
In the former case, it was claimed that the then Board of Insurance Commissioners failed to appoint an attorney for the liquidator and this Court justified and held not void the action of the Court in making such appointment. We said that “in our opinion the Texas Statute (Art. 21.28) does not vest the State Board and its Commissioner with the sole and exclusive power to appoint counsel under any and all conditions.” It is this holding with which I now disagree. In the former opinion we said: “* * * Once liquidation has begun, the Court is not rendered powerless to carry out its heavy responsibilities by a nonperformance or misperformance on the part of the Board or its Commissioner. It follows that an order of the Court appointing an attorney to assist in liquidation proceedings is not void.”
If this holding is permitted to stand nothing but chaos and confusion can result. A court can, as it obviously has in the present case, under an honest belief he is carrying out his judicial responsibility, create situations in order to exercise powers not given to him by the statute. The respondent has not changed his position since the opinion in the former case was announced. He maintains now that Article 21.28, supra, of the Insurance Code is directory and not mandatory, and that the court has the power to appoint attorneys and fix their compensation. He maintains that the court has the exclusive power and duty to appoint a duly qualified person as receiver, irrespective of the provisions of Article 21.28, supra. He maintained the same position in the former case.
It may be argued that the Legislature is the body which has the duty to define the duties and responsibilities contemplated by the Act. I maintain that the Legislature has clearly defined the duties and responsibilities of the Board of Insurance and the Commissioner. The duty and responsibility under the present law clearly rests with the Board and the Commissioner and not the court. The administration of liquidation of insurance companies is not the responsibility of the court in the sense that the Respondent Betts would have us believe. He thinks that in order to carry out his duties as a Judge under this statute he must have the authority to appoint attorneys in whom he has trust. In this the respondent has a misconception of his responsibility and his duties. He is accountable only for the proper exer *622 cise of the judicial functions required of him under Article 21.28, supra. The Respondent Betts is not accountable as to whether or not the Liquidator-Receiver is a suitable person. The statute places that responsibility squarely with the relators. Why should the Respondent Betts be so concerned about the amount of compensation paid to the attorneys for the Liquidator-Receiver? That responsibility is placed with the State Board of Insurance under the provisions of Section 12(b) of Article 21.28, supra. He is no more responsible for the administration of the liquidation of insurance companies than for the administration of the Railroad Commission or the State Banking Department, or the administration of the affairs of the Commissioners Court of Travis County. A District Court simply does not have the authority or power to revise the discretionary acts of any of these agencies of government except in a judicial proceeding.
The caption amending Article 21.28 in 1955, providing for the mendment of the Texas Insurance Code of 1951, reads in part: “* * * Such Act concerning the liquidation, rehabilitation, reorganization, or conservation of insurers, and placing same under the Board of Insurance Commissioner * * Similar language appears in the caption of the original Liquidation Act in 1939. The District Court’s supervisory powers necessarily must be limited to judicial supervision and cannot under any circumstances be extended to include executive supervision. The District Court cannot conduct hearings without notice, such as was done in this case, and then by judicial flat set aside the acts of the relators, neither can the District Judge substitute his discretion for that of the administrative agency. If nothing else, the separation of power doctrine should apply, assuming, of course, that the Act is constitutional and that under the terms of such Act it is a proper administrative function for the relators to perform in selecting suitable persons to serve as Liquidator-Receiver, to serve as attorneys for such Liquidator-Receiver, and to fix the compensation to be paid such persons. There is nothing in the statute or the common law that vests the District Court with discretion to invade the administrative field in the liquidation of insurance companies. This is so even in the event the relators should fail to act.
The respondents argue that under our former opinion, Respondent Betts had the authority to increase the compensation of the respondent attorneys and that his order increasing such salaries was not an abuse of discretion. I do not agree with the *623 contention. The question should be resolved in favor of relators in such positive language as to forever put the subject to rest.
Respondents make the same contention as to the order appointing V. F. Taylor as Receiver. I cannot agree with respondents in their contention that the provisions of Article 21.28, supra, amount to no more than a recommendation by the Legislature, and that the Legislature in fact intended that all administrative power should be vested in the District Court.
Respondents’ contention that the District Court has the exclusive responsibility under what respondents term the “judicial insolvency statutes” enacted prior to the enactment of Article 21.28, supra, in 1939, cannot withstand close examination. Sections 6 and 7 of the Act of 1939 refutes such contention. Section 6 of Article 21.28, supra, provides that in the event of conflict the provisions of the 1939 Act would prevail, and it went further and provided that all laws or parts of laws in conflict with Article 21.28 (1939) were repealed to the extent of such conflict. Section 7, the emergency clause of the Act, stated the emergency to be the fact that there were no adequate laws in the State of Texas for the liquidation, reorganization, or conservation of an insolvent insurance company. The inadequate laws referred to were the same laws Respondent Betts now relies upon as authority for the issuance of the orders under consideration. The Legislature deemed these prior general receivership laws as wholly inadequate in dealing with the liquidation of insurance companies. Hence, Article 21.28, supra, was passed as an emergency measure. The effect of our former opinion was to, in part at least, give effect to the older general receivership statutes and has to a great degree nullified the wholesome provisions of the 1939 Act as amended. This mistake should be corrected immediately. I did not believe at the time that the holding to the effect that the failure of the Board to act was ground for the Court to act would be so far reaching as to cause any court to lose sight of the principal holding in the case.
The writ of mandamus should be granted commending the Honorable Chas. 0. Betts, Judge of the District Court of Travis County, Texas, 98th Judicial District, to expunge, set aside, and hold for naught the order involved herein.
Opinion delivered July 16,1958.
Combined text as published — syllabus, headnotes and all opinions in one document
315 S.W.2d 286 (1958)
STATE BOARD OF INSURANCE et al., Relators,
v.
Honorable Chas. O. BETTS, Judge of The District Court of Travis County, Texas, 98th Judicial District, and Horace Wimberly et al., Respondents.
No. A-6870.
Supreme Court of Texas.
July 16, 1958.
*287 Will Wilson, Atty. Gen. of Texas, Fred B. Werkenthin and C. K. Richards, Asst. Attys. Gen., for relators.
Horace Wimberly, A. M. Le Croix, V. F. Taylor, Rudy Rice and Renne Allred, Jr., Austin, Cantey, Hanger, Johnson, Scarborough & Gooch, Ft. Worth, Harry S. Pollard, Austin, W. G. Walley, Jr., Beaumont, for respondents.
NORVELL, Justice.
This is an original action of mandamus wherein the State Board of Insurance and the Insurance Commissioner pray that the respondent District Judge be instructed to expunge, set aside, and hold for naught an order entered by him, dated May 1, 1958 which purports to increase the monthly compensation allowed to V. F. Taylor, Horace Wimberly and A. M. Le Croix, attorneys for the liquidator-receiver in insurance company receivership cases pending in the District Court of Travis County, Texas, 98th Judicial District.
Respondents contend that the provisions of Article 21.28, § 12(b) of the Insurance Code V.A.T.S., are directory only despite the mandatory import of the words selected by the Legislature. The particular sub-section involved reads as follows:
"(b) Appointments, Expenses. The Board shall have the power to appoint and fix the compensation of the liquidator and of such special deputy liquidators, counsel, clerks, or assistants, as it may deem necessary. The payment of such compensation and all expenses of liquidation shall be made by the liquidator out of funds or assets of the insurer on approval of the Board. An itemized report of such expenses, sworn to by the liquidator and approved by the Board, shall be presented to the court from time to time, which account shall be approved by the court unless objection is filed thereto within ten (10) days after the presentation of the account. The objection, if any, must be made by a party at interest and shall specify the item or items objected to and the ground of such objection. The court shall set the objection down for hearing, notifying the parties of the setting. The burden of proof shall be upon the party objecting to show that the items objected to are improper, unnecessary or excessive."
(Under the 1957 amendment to the Code, the power to fix compensation devolved upon the Insurance Commissioner. See, State Board of Insurance v. Betts, Tex., 308 S.W.2d 846 , loc. cit. 949; Acts 1957, 55th Leg., ch. 499, p. 1454; Arts. 1.02 to 1.09 incl., Vernon's Ann.Tex.Ins.Code.)
The challenged order makes no reference to the statute and the District Judge undoubtedly believed that he possessed the authority to raise the salaries, fees or stipends of attorneys serving in his Court without reference to the statutory powers vested in the State Board of Insurance *288 and the Insurance Commissioner. This is made abundantly clear by the terms of the order itself which recites, as a basis for the action taken, that there had been no increase in the compensation paid to such attorneys since May 1, 1957, although the work load had increased. It was accordingly ordered "that effective May 1, 1958, V. F. Taylor, Horace Wimberly and A. M. Le Croix, attorneys, be paid additional fees in the sum of $50.00 per month, in addition to all legal fees and expenses heretofore authorized and set by Orders of this Court; * * *."
Article 21.28, § 12(b) not only provides that the Insurance Commissioner under the supervision of the State Board of Insurance (Article 1.02 of the Insurance Code) shall have the power to appoint and fix the compensation of counsel but also directs the method and means by which payments or compensation may be made. The supervisory authority of the district court in this particular is also set forth in some detail. We are not here concerned with an unsettled or unliquidated claim for services rendered by an attorney for a receiver, but rather with a month to month employment upon a specified salary basis. While in the first Betts case (State Board of Insurance v. Betts, Tex., 308 S.W.2d 846 ), we recognized that the District Judge was vested with extensive supervisory powers under our statutory plan of insurance company liquidation and rehabilitation, we did not hold that the provisions of Article 21.28 were directory only. The District Judge here has attempted by unilateral action to raise the monthly compensation to be paid lawyers employed on a semi-permanent basis to handle the legal work involved in receivership cases. We do not believe the case of the In re Casualty Company of America, 244 N.Y. 443 , 155 N.E. 735, 736 , cited in our former opinion, supports this action. That case involved an unliquidated claim for services rendered by an attorney. The applicable statutory provision was that:
"* * * The compensation of such special deputy superintendents, counsel, clerks and assistants, and all expenses of taking possession of and conducting the business of liquidating any such corporation shall be fixed by the superintendent, subject to the approval of the court, and shall, on certificate of the superintendent, be paid out of the funds or assets of such corporation." Laws N.Y.1909, c. 300, § 63, subd. 6.
The New York Court of Appeals held that the superintendent of insurance was not an arbitrator clothed with absolute and final authority to settle the claim and thus be a "judge in his own cause." The opinion, however, makes a distinction between the case where one is employed at an agreed rate of compensation (in which case the court possesses a veto power under the New York statute) and the case wherein no rate of compensation is set but the amount thereof is left to an implication of law. This latter situation gives rise to an unsettled claim and was the one considered by the New York Court in the cited case.
Here, we have what amounts to an employment at an agreed or set rate of compensation. A salary scale had been adopted and respondent attorneys have been paid compensation in accordance therewith. On May 1, 1958 the District Judge sought to effect an increase of salaries for the stated reason that in his opinion such salaries were inadequate and unfair to the respondent attorneys. In so doing he encroached upon a field of discretionary power vested in the Insurance Department by statute. The fact that numerous transactions incident to an insurance company receivership are placed under the supervision of the court does not operate to destroy all discretionary powers of the Insurance Department, Matter of People (Title v. Mortgage Guaranty Co.), 264 N.Y. 69 , 190 N.E. 153 , 96 A.L.R. 297 , nor will it justify our overriding the statute in order to support the questioned order. To permit the Insurance Department to set the salaries of those engaged in the liquidation of insurance companies does *289 not necessarily interfere with the constitutional authority of the judicial branch of government. As pointed out in the first Betts case, the winding up of a corporation's affairs is not necessarily a judicial function. ( 308 S.W.2d 846 ).
In the present case there is no suggestion of nonaction on the part of the State Board of Insurance or the Insurance Commissioner as was the situation in the former case. We therefore conclude that the disputed order is void. There is no statutory authorization supporting it and hence a writ of mandamus will lie to expunge the void order from the records of the 98th District Court. State Board of Insurance v. Betts, Tex., 315 S.W.2d 279 .
Some contention is made on behalf of respondents Wimberly and Le Croix that their fifty dollar per month pay raise was permitted by a budget order of the Board of Insurance and that the liquidator-receiver consented to the District Judge's action of May 1, 1958.
It appears from the exhibits before us that some time prior to the filing of this action, the respondent District Judge, rather than the Insurance Department had in effect set the amount of salary or fees to be paid to attorneys representing the liquidator-receiver in the 98th District Court.
On May 1, 1957 the respondent Betts, acting as Judge of the 98th District Court, entered certain orders setting and allowing the following legal fees to the respondents, namely, V. F. Taylor$900 per month ($10,800 per year), Horace Wimberly $650 per month ($7,800 per year), and A. M. Le Croix$600 per month ($7,200 per year).
At the time this action was taken there was in effect an order of the Board of Insurance Commissioners dated January 25, 1957 which specified the following maximum salaries for attorneys in the Legal Section of the Liquidation Division of the Insurance Department:
1 Chief Attorneyto be a person licensed to practice in the State and Federal Courts $ 9,600 2 Attorneysto be persons licensed to practice in the State and Federal Courts 7,500 3 Attorneysto be persons licensed to practice in the State Courts of Texas 6,900
On May 29, 1957 (prior to the effective date of the 1957 amendments to the Insurance Code) the Board of Insurance Commissioners, composed of John Osorio, J. P. Gibbs and Mark Wentz took cognizance of Judge Betts' order of May 1, 1957 and recognized a conflict between the orders of the District Judge and the salary scale set by the Board, but nevertheless adopted an order which recited and provided that:
"The salary scale established by Order of this Board dated January 25, 1957, for the attorneys of the Liquidation Division is in line with the salary scale authorized by the Legislature for the Attorney General's Department of this State. This Board can find no reason for a higher pay scale for the attorneys of the Liquidation Division of the Board than that authorized to be paid to the members of the Attorney General's Department. However, the Liquidator employed by this Board must issue salary checks at the end of this month to these employees, and he is in a conflicting position between the Orders of this Board and the Orders of this said Court. Therefore, pending further legal study and research by this Board and by the Attorney General's Department of the conflict between the Orders of this Board and the said District Court, the Board hereby authorizes its Liquidator, J. D. Wheeler, to issue salary checks in line with the said Orders of the said District Court for the month of May, 1957 only, and future salary payments will be subject to further Orders of this Board, or its successor."
On June 28, 1957, after the effective date of the 1957 amendments to the Insurance Code, William A. Harrison, Commissioner of Insurance, re-affirmed the position taken *290 by the predecessor authority in words practically identical with those hereinabove set out, but authorized the liquidator "to issue salary checks in line with the said orders of the District Court for the month of June, 1957, only." Similar orders were entered thereafter by Harrison in subsequent months pending the completion of the legal study and research being conducted by the Insurance Department and the Attorney General.
On October 15, 1957 the Commissioner of Insurance adopted a budget order which contained the following items relating to the maximum salaries for attorneys in the Legal Department of the Liquidation Division:
1 General Attorney $10,800.00 3 Attorneys 8,400.00 3 Attorneys 7,500.00
While the $50 per month pay raise awarded to Taylor by the District Judge on May 1, 1958 would be a $600 per year increase over the $10,800 annual salary provided by the order of May 1, 1957 and thus exceed the maximum budget allowance by $600, Wimberly and Le Croix say that their $50 per month increase ($600 plus $7,800 and $600 plus $7,200) would not exceed the $8,400 figure set as the budget maximum for three attorneys in the October 15, 1957 budget order. They also say that sometime prior to the entry of the order of May 1, 1958 the liquidator-receiver James M. Williamson had said orally that the proposed $50 raises were "okeh" with him.
Whatever problem may be suggested by these various orders and actions is obviated by the fact that prior to the order of May 1, 1958 Wimberly and Le Croix were being actually paid annual salaries of $7,800 and $7,200, respectively; that these salaries had not been raised by action of the Board of Insurance or the Insurance Commissioner, but on the contrary said Board and Commissioner refused to go along with the District Judge (or to approve the okeh of the liquidator-receiver, if we assume that his okeh was actually given) and by an official order dated May 14, 1958 directly challenged the District Judge's action in raising the salaries of the attorneys mentioned. This order states that:
"It has come to the attention of the State Board of Insurance and the Commissioner of Insurance that on May 1, 1958 * * * the 98th District Court entered an order increasing the compensation paid to Messrs. Taylor, Wimberly and Le Croix by the sum of Fifty ($50.00) Dollars per month. This increase to such attorneys has not been authorized or approved by the State Board of Insurance and Commissioner of Insurance under the authority of Article 21.28, Texas Insurance Code, and the need, necessity and propriety for the increase has not been made known to the State Board of Insurance or the Commissioner of Insurance by anyone. It is the opinion of the State Board of Insurance and Commissioner of Insurance that such Order of the 98th District Court is not in accordance with law, and in particular, Article 21.28, Section 12, Texas Insurance Code."
We are thus again confronted with the question of whether or not the provisions of Article 21.28, § 12(b) of the Insurance Code are merely directory. We see no substantial difference between the position of Wimberly and Le Croix on the one hand and that of Taylor on the other. The order purporting to raise the salary of all three respondents is void and we assume the District Judge will so treat them. Otherwise the writ of mandamus will issue as prayed for.
The writ of mandamus is conditionally granted. No motion for rehearing will be entertained. Rule 515, Texas Rules of Civil Procedure.
Concurring opinion by Associate Justice SMITH.
*291 SMITH, Justice (concurring).
The expressions contained in my concurring opinion in State Board of Insurance v. Betts, Tex., 315 S.W.2d 284 , are adopted as my concurring opinion in this Cause.
CALVERT, Justice.
I respectfully dissent from the holding that the order under attack in this case is void. I believe the order is a perfectly valid order. And if, as the majority have held, Sec. 12(b) of Art. 21.28, Texas Insurance Code, vests in the State Board of Insurance exclusive power and authority to fix the compensation of attorneys employed to represent the receiver in insurance liquidations, then I believe the statute to that extent contravenes Section 1 of Article II of the Constitution of Texas, Vernon's Ann.St., [1] and is itself void.
The order under attack in this case does not occupy the same status as the order this day held void in Cause No. A-6901, State Board of Insurance v. Betts, Tex., 315 S.W.2d 279 . I have agreed to the holding in that case. Moreover, I am satisfied that our recent decision in Cause No. A-6540, State Board of Insurance v. Betts, Tex., 308 S.W.2d 846 , supports our holding in Cause No. A-6901, but I am equally satisfied that it does not support the majority view in this case. On the contrary, that decision and the decisions from other state jurisdictions on which we there relied seem to me to compel a holding that the order under attack in this case is not void.
We should not mistake the true question which we are to decide in this case. It is not whether, in our opinion, the salary schedule set by the State Board of Insurance is more reasonable than that set by the District Judge. It is not whether, in our opinion, these receivership proceedings could be more expeditiously and economically administered by the State Board of Insurance than by the District Court. The question is this: to which governmental agency, the State Board of Insurance or the District Court, do the Constitution and laws of this state confide final jurisdiction and power to control the administration of the receivership assets?
The majority hold that sec. 12(b) of Art. 21.28 confides that final power and jurisdiction to the State Board of Insurance, and that the statute imposes on the court a mandatory duty to approve whatever action the Board may take with respect to fixing the compensation of the liquidator, deputy liquidators, counsel, clerks, and assistants. It is only by so holding that the majority are able to declare the order involved in this proceeding void. Wholly aside from the fact that the holding is directly contrary to what we said in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846 , it will hardly stand examination and analysis as I shall undertake to demonstrate.
It is my position that Art. 21.28 should be considered and interpreted as a whole in the light of the basic and fundamental law of this state, and that when that is done the provisions of sec. 12(b) which purport to empower the Board to fix salaries should be held to be directory only.
Article 21.28 does not provide for a purely administrative liquidation of insolvent insurance companies. The Legislature may have so intended as an amicus curiae suggests, but it did not so provide. Extensive supervision and control of liquidations is vested in the courts by the very terms of that Article. Many of the statutory provisions conferring judicial control are *292 noted in our opinion in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 852 , and they need not be noted in detail here. It is enough to note those which in my judgment give validity to the order increasing the compensation of attorneys.
A receivership proceeding against an insurance company may only be commenced in a court (sec. 1(b)), and only a court may determine the necessity for the appointment of a receiver. Sec. 2(a). The court may on its own motion and at any time during a proceeding, issue such orders "as may be deemed necessary to prevent interference with the receiver or the proceeding, or waste of the assets of the insurer." Sec. 4(b). Upon taking possession of the assets it is the duty of the receiver to take steps to liquidate them "subject to the direction of the court." Sec. 2(e). These provisions, standing alone, would seem sufficient to authorize the order under attack in this case. But if that be not so, authority to make it is put beyond question by the opening sentence of sec. 2(b) where it is provided that "the property and assets of such insurer shall be in the custody of the court as of the date of the commencement of such delinquency proceedings."
Far from removing the assets of insolvent insurance companies which are in receivership from control of the courts, the Legislature has thus committed the assets of such companies to the custody of the courts. Such assets are in custodia legis. The powers of the government of the State of Texas over them lie with the judicial branch of the government, and under the provisions of sec. 1 of Article II of the Constitution "no person, or collection of persons" of the Legislative or Executive branches of the government may exercise any of the powers attached to the courts.
The compensation paid the three attorneys is not paid from any fund over which either the Legislative or Executive branches of the government has control. The compensation is not paid from a state fund, either general or special. Even if assets of these companies were in a state fund, subject to legislative control, they could not be made available for payment of compensation for personal services without an appropriation by the Legislature which has not here been made. But they are not in a state fund, and the Legislature could not have appropriated them to a specific state use even had it tried. The Legislature itself recognized this basic limitation on its own power when it provided in sec. 12(b) for final approval by the courts of all expenditures from receivership funds or assets.
In passing on the power of a court to appoint an attorney in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 853 , we used this language:
"If, in the discharge of the duties of supervision placed upon him by statute, the District Judge decides that other or additional counsel are essential to the proper administration of a pending receivership case, such decision, while it may be subject to correction in other proceedings, may not be held void in a mandamus action in the absence of a clear showing of unreasonable, capricious and arbitrary action."
The same section of Art. 21.28 which provides for the setting of salaries by the Board uses the same mandatory language in providing for the appointment of counsel by the Board. It is not suggested that the court in this case has acted unreasonably, capriciously or arbitrarily in adding to the compensation of the three attorneys. As a matter of fact, as the majority opinion discloses, the compensation of two of the attorneys as set by the court is within the limits of the Board's own budget and the third exceeds the budget figure only slightly. Are we not now in position of holding that while the court may not encourage and reward hard work and long hours by those already employed to the extent of an expenditure of $1,800 per year, it may add another attorney at a cost to the receivership of from $7,000 to $10,000 per year?
*293 How far are we prepared to go in holding that sec. 12(b) imposes on courts a mandatory duty to approve, without question, all salaries set by the Board? Having held that the court cannot increase the compensation of attorneys to a figure it regards as fair and reasonable, must we not then hold that the court cannot reduce the compensation below the Board's figure, even if the court regards it as too great an encroachment on receivership assets or out of line with services performed? And what of other types of expenses? Section 12(b) also provides that the court shall approve all reports of expenses properly authenticated and filed by the liquidator-receiver, unless objection is filed within ten days. Does that mean that the court itself may not, on its own motion, authorize other expenditures it regards as proper in the preservation of the assets of the receivership? Does the use of the mandatory words "shall approve" mean that the court is without power, in the absence of objection, to audit such accounts and eliminate items it regards as improper or wasteful of assets?
There is no more mandatory language in Art. 21.28 than that which has been quoted above from sec. 2(b). It says that the property and assets of an insolvent insurance company " shall be in the custody of the court." Having thus placed the assets in the custody of the courts and charged the courts with the final responsibility of administering and preserving them, has the Legislature then denuded the courts of the final power to carry out the responsibility by making the orders of the courts subject to the veto power of an administrative agency? I think not. May it do so? I think not.
We cited and quoted with approval from the case of In re Casualty Co. of America, 244 N.Y. 433 , 155 N.E. 735 , as authority for our decision in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846 . The majority cite it again in their opinion in this case but now seek to distinguish it. The distinction is hardly valid. It is true that the New York court had before it only the narrow question of the power of the trial court to revise upward the allowed compensation of an attorney whose services had been engaged by the Superintendent of Insurance without an agreement in advance as to the compensation to be paid. But in deciding that question the court found it necessary to determine the much broader question of the respective powers of the statutory liquidator and the supervising court.
The governing provision of the New York statute was in much the same language as sec. 12(b) of Art. 21.28. It provided [ 244 N.Y. 443 , 155 N.E. 736 ]:
"`For the purposes of this section, the superintendent shall have power to appoint, under his hand and official seal, one or more special deputy superintendents of insurance, as his agent or agents, and to employ such counsel, clerks and assistants as may by him be deemed necessary, and give each of such persons such powers to assist him as he may consider wise. The compensation of such special deputy superintendents, counsel, clerks and assistants, and all expenses of taking possession of and conducting the business of liquidating any such corporation shall be fixed by the superintendent, subject to the approval of the court, and shall, on certificate of the superintendent, be paid out of the funds or assets of such corporation.'"
In interpreting the statute to delineate the respective powers of the superintendent and the trial court, the Court of Appeals in an able opinion by Chief Justice Cardozo said:
"The liquidator may find it convenient in the administration of the business to hire deputies or clerks or counsel at an agreed rate of compensation, or to attain a like result, when agreement has been omitted in advance of the approval of a bill or *294 the settlement of an account, the approval or the settlement being ineffective without the creditor's assent. He may find it convenient, when incurring other expenses, to follow the same course. He has authority under the statute to do this if he will. The statute is notice to him however, and to any one who deals with him, that the agreement, whatever its form, is of merely provisional validity. He may fix the rate of compensation as a trustee or an assignee for creditors or a receiver may be said to fix it (Cf.L. 1903, c. 336 § 9), but subject at all times to the approval of the court. The meaning is that even when he acts, the court shall have a veto. * * * [ 155 N.E. 736 .]
* * * * * *
"Argument is made that what the liquidator does in fixing the value of a service, if not exempt altogether from review by the courts, must be held to be exempt unless power and discretion have been flagrantly abused. When he is merely wrong, the court is helpless, but when he is very wrong indeed, its authority is restored. There can be no basis for this distinction unless it be in the assumption that the superintendent is an arbitrator whose award is not impeachable for error in the determination of the merits, but impeachable only for mistake appearing upon the face thereof, or for fraud, or abdication of duty equivalent to fraud. (Cases cited.) But an arbitrator he is not, as we have already sought to show. * * * Terms more distinct than any to be found in this enactment must stamp him a judge before the courts will be shorn of the power of supervision that would otherwise be theirs." 155 N.E. 736 , 737.
The majority, as indicated, seek to distinguish the foregoing case on the ground that it involved the fixing of compensation for services for which there had been no advance agreement, whereas compensation in this case was fixed in advance on a yearly basis. But, the New York Court of Appeals clearly held that the trial court had final power of revision over the compensation of counsel for the liquidator whether the compensation was fixed by the liquidator in advance or was left open to be fixed after completion of the services. The holding is especially significant in view of the fact that the intermediate court had held that the trial court had power to cut down the superintendent's award of compensation but had no power to increase it.
If the tenuous distinction between the cases found by the majority be nevertheless a valid one, cannot the district court achieve the same result in this case? If the attorneys are administrative employees, they owe for their salaries only forty hours of work per week. Article 5165a, Vernon's Annotated Texas Statutes. The record indicates that they have been working in excess of the number of hours for which they are paid by salary. What, then, is to prevent the court from allowing a "claim" for extra compensation for overtime work?
If the Legislature had not intended the courts to have final power and jurisdiction to determine the compensation for personal services and other expenses to be paid from the assets of an insurance company in receivership, it should not have placed the assets in the custody of the court, and should not have conferred upon the courts what we termed in State Board of Insurance v. Betts, Tex., 308 S.W.2d 846, 853 , "an extensive judicial control of delinquency proceedings." Having done so, however, we are brought face to face with the question of whether the Board or the courts have the veto power when the two cannot agree. May the Board veto the extensive judicial control of the courts over the assets committed to their custody? Or may the courts exercise a right of veto over Board proposals? The majority have, in effect, answered these questions in favor of the Board and have thus approved legislative *295 and administrative interference with the exercise of constitutional judicial power.
Once an insurance receivership is begun in a district court and that court acquires control of the receivership assets, the power to deal with the assets in the payment of receivership expenses is conferred on the courts by sections 1 and 8 of Article V of the Constitution. Any legislation which interferes with the effective exercise of that power and hampers the court in its effective exercise is unconstitutional and void. 11 Am.Jur. 908, Constitutional Law, § 206. We recognized that to be the rule in State Board of Insurance v. Betts, 308 S.W.2d 846, 851 . Apparently the majority have now abandoned it; else, how can it be said that an administrative agency may exercise a power of veto over the reasonable exercise of the power by the court? I repeat, the right of the Board to determine the compensation of attorneys engaged in liquidating receivership assets should be held directory and sec. 12(b) of Art. 21.28 would then have no unconstitutional aspects. That, in effect, was the holding of the courts in State ex rel. Sorensen v. State Bank of Minatare, 123 Neb. 109 , 242 N.W. 278 and Cooper v. Otero, 38 N.M. 164 , 29 P.2d 341 .
The step the majority have taken to resolve a confused and unwholesome situation arising out of a conflict of authority is neither a logical nor a proper one. It makes for confusion twice confused. It puts this court in the receivership business. Whereas the statute purports to confer the power of administering insurance receiverships on the State Board of Insurance under the supervision of the district courts, we have now said, in effect, that this court will assume final supervision of all of the acts of the trial court in supervising the details of such proceedings, and will, in a mandamus proceeding, expunge any order made by a district judge not proposed or approved by the State Board of Insurance. Or is it only those orders not approved by us? The court should not permit itself to be so used to perfect imperfections in the law. That is a legislative and not a judicial function.
The inharmonious relationship between the State Board of Insurance and the District Judge of the 98th Judicial District is unfortunate. It is not within the province of this court to assess fault for that situation, or to question the motives of either. I do not do so. I assume that both have acted in the good faith belief that they were exercising only those powers which the law conferred upon them for a proper administration of insurance receiverships. Which has the final power in the premises is a legal question, not a personal one. The question is not to be decided by sharp words or insinuations with respect to the conduct of either agency. They have found no place in this opinion.
I would deny the writ of mandamus in this case.
NOTES
[1] "Section 1. The powers of the Government of the State of Texas shall be divided into three distinct departments, each of which shall be confided to a separate body of magistracy, to wit: Those which are Legislative to one; those which are Executive to another, and those which are Judicial to another; and no person, or collection of persons, being of one of those departments, shall exercise any power properly attached to either of the others except in the instances herein expressly permitted."
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