Godbold v. Manibog

• Decision Date: 05 August 1942
• Docket Number: No. 2504.,2504.
• Citation: 36 Haw. 206
• Parties: NORMAN D. GODBOLD, JR., AS INSURANCE COMMISSIONER OF THE TERRITORY OF HAWAII, v. GONZALO MANIBOG, AS PRESIDENT OF THE FILIPINO AID ASSOCIATION.
• Court: Hawaii Supreme Court

36 Haw. 206

NORMAN D. GODBOLD, JR., AS INSURANCE COMMISSIONER OF THE TERRITORY OF HAWAII,

v.GONZALO MANIBOG, AS PRESIDENT OF THE FILIPINO AID ASSOCIATION.

No. 2504.

Supreme Court of the Territory of Hawai‘i.

Submitted July 2, 1942.

Decided August 5, 1942.

APPEAL FROM CIRCUIT JUDGE FOURTH CIRCUIT. HON. J. F. MCLAUGHLIN, JUDGE.

Syllabus by the Court

The doctrine of estoppel is not applied to the extent of impairing sovereign powers of a State, such as it exercises, for example, in the enactment and enforcement of the police power. Neither can a State be estopped by the unauthorized acts or representations of its officers.

To apply the doctrine of estoppel to the insurance commissioner of the Territory in this case would be equivalent to applying it to the Territory for whom he acted in the performance of a duty imposed upon him by the legislature within the police power of the Territory.

If a statute is susceptible of two constructions, one of which would render it constitutional and the other unconstitutional, the one rendering it constitutional will be adopted.

J. V. Hodgson, Attorney General and W. D. Ackerman, Jr., Deputy Attorney General, for the appellant.

H. Irwin for respondent.

KEMP, C. J., PETERS AND LE BARON, JJ.

OPINION OF THE COURT BY KEMP, C. J.

This is an appeal by Norman D. Godbold, Jr., as insurance commissioner of the Territory of Hawaii (hereinafter referred to as “petitioner” or “commissioner,” as the context requires) from a decree in equity. The proceeding in which said decree was rendered was instituted by petitioner against Gonzalo Manibog (hereinafter referred to as “respondent”) as president of the Filipino Aid Association (hereinafter referred to as “the association”), a voluntary association duly registered and licensed as a mutual benefit society. This suit was instituted for the purpose of having a receiver appointed for the association under the provisions of Act 209 of the Session Laws of Hawaii 1939 (Series D-164) relating to mutual and fraternal benefit societies.

Petitioner alleged inter alia that on the 10th day of May, 1941, he ordered an examination into the affairs of the association as of April 30, 1941; that said examination revealed assets of $134,235.18 and that the paid-in dues or contributions of the members of the association in good standing amounted to $322,874.50; that the equity of the said members is in danger of being further reduced if said association is permitted to continue in business; that the constitution and by-laws of the association as amended and adopted February 1, 1941 (Exhibit “A” attached to the petition), require the association, under certain conditions, to pay to its members stated amounts of money as “Going Home Benefits”; that said examination revealed that the association is unable and will continue to be unable to meet its benefit obligations required by its by-laws; that applications for benefit payments made in October, 1938, and thereafter, have not been paid; that the successful and continued operation of the association is dependent upon dues and contributions from new members; that no new members have joined the association for a period of sixteen months prior to April 30, 1941; that there are 1272 members of the association holding 2467 memberships (the by-laws permit double memberships); that 850 of said members, representing 1783 memberships, have filed applications for “Going Home Benefits”; that the dues or contributions paid in by said applicants aggregate $254,075; that to pay said applicants their going-home benefits at the rates set forth in the by-laws would require $693,965, a sum in excess of that already paid in by all members; that said amount is beyond the ability of the members of the association to pay; that under the by-laws a member may request and be granted a refund of two-thirds of the amount paid in by him; that to make refunds to all members on that basis would require $215,249, a sum in excess of available assets; that under the by-laws the secretary-treasurer is required to receive all contributions of members and deposit same in a bank for payment of benefits and expenses; that the president, and not the secretary-treasurer, receives all such contributions and that such contributions are not deposited in a bank but are retained as cash on hand; that the by-laws require that applications for going-home benefits shall be stamped with or have endorsed thereon the date and hour of their receipt and that such applications were not stamped or endorsed, as required; that the by-laws require that applications for going-home benefits be considered and approved or disapproved by the board of directors in the order of their receipt; that the board of directors has taken no action on such applications; that the president, wholly without authority, has acted on such applications and has determined which should be approved or disapproved; that said examination revealed a shortage of $1054.20 in the cash on hand on April 30, 1941; that funds of the association were, wholly without authority, used by the president for other than the uses of the association; that prior to January 14, 1941, applications for benefits had not been entered in a public record of the association; that a demand was made upon the association by letter dated January 14, 1941 (Exhibit “B”), to correct the foregoing and other irregularities within thirty days and that the association has refused and neglected to comply with said demand; that prior to said 14th day of January, 1941, vouchers supporting expenses and disbursements were not all on hand; that demand to correct such irregularity was made by letter (Exhibit “B”) but said association has refused and neglected to comply with said demand.

After setting forth the facts of which the foregoing is the substance the petition proceeds as follows: “XIV That from the foregoing and upon the examination of the books, papers, affairs and conditions of said Association, the petitioner has ascertained, found and determined that irregularities have been practiced by the officers and directors of said Association; that the assets of said Association have been impaired; that said Association has been conducting its affairs in an unsafe and unauthorized manner so that the continuance of its business would be hazardous to the public; and that it is necessary for the protection of the interests of the members of said Association and of the public that a receiver be appointed for said Association. XV That under and by authority of the provisions of section 6852-I of chapter 224, Revised Laws of Hawaii, 1935, as amended, your petitioner, on or about the 16th day of July, 1941, closed the doors of said Association and took charge of the books, assets and affairs of said Association, pending the appointment of a receiver for said Association, for the protection of the interests of the members of said Association and of the public.”

The answer of the respondent admitted the truth of many of the allegations of the petition and alleged that because of the seizure of the books and records of the association he was unable to either admit or deny the truth of the allegations as to the value of the assets of the association or the amount of dues paid in by its members. However, at the trial it was stipulated that for the purpose of the trial the value of the assets of the association and the amount of dues paid in by the members were correctly alleged in the petition. In view of the findings of fact by the circuit judge, as distinguished from his conclusions of law, which findings are apparently accepted by both parties as being supported by the evidence, admissions and stipulations, we do not deem it necessary at this point to further state the contents of the answer, stipulations or evidence.

In his decision the circuit judge made extensive findings of fact in substantial accord with petitioner's allegations, which he stated “disclose that I am in accord with Petitioner's contention that the financial plan under which this Association operates is inherently and patently unsound.” He also stated that “Associations such as this should be regulated and compelled by law to either operate under a sound financial plan or be dissolved,” and that “The 1939 Legislature appears to have had such in mind,” citing the 1939 House Journal, page 619. After noticing that under the law in 1937, when this association was first registered, the commissioner was required to register an association, if its objects were lawful, the conclusion was reached that the 1939 amendment (Act 209) additionally required the commissioner to pass upon the soundness of the organization's financial plan (§ 6852-A) and also required an existing and registered association to qualify itself in conformity with the provisions of said Act within six months after the passage of Act 209, failing which its right to operate would cease. (§ 6852-F.) Section 6852-F of said Act 209 of the Session Laws of 1939 was interpreted as giving the commissioner the power and authority to deny existing associations, when attempting to qualify, authority to continue business if upon due investigation he found the association's financial plan unsound.

The conclusion was reached that because the commissioner in 1939 permitted the association to qualify under the Act when its financial plan was unsound and still later, in February, 1941, accepted and filed amended by-laws containing a provision which rendered the financial plan still more unsound, thereby neglecting two opportunities to protect directly the public interest by permitting the association to continue operating under a flagrantly unsound financial setup, he cannot now be heard in equity to argue that as the association's financial plan is unsound a receiver must be appointed to protect the public interest. It was further concluded that the interests of the members could not be so protected for the...