Household Finance Corp. v. State

• Decision Date: 08 May 1952
• Docket Number: Nos. 31620,31621,s. 31620
• Court: Washington Supreme Court
• Parties: HOUSEHOLD FINANCE CORP. v. STATE.

Page 451

40 Wn.2d 451

244 P.2d 260

HOUSEHOLD FINANCE CORP. v. STATE.

Nos. 31620, 31621.

Supreme Court of Washington, en Banc.

May 8, 1952.

Hubachek & Kelly, Chicago, Ill., McMicken, Rupp & Schweppe, Seattle, for appellant.

Smith Troy, Fred L. Harlocker, Olympia, Kenneth A. Cole, Seattle, for respondent.

DONWORTH, Justice.

Household Finance Corporation, appellant here, appealed to the superior court for Thurston county from orders of the supervisor of banking which denied its applications for licenses for a place of business in Vancouver and for a second place of business in Seattle.

The Washington small loan act, Laws of 1941, chapter 208, Rem.Supp.1941, §§ 8371-1 to 8371-27, inclusive provides that any aggrieved applicant for a license may appeal to the superior court for Thurston county. The appeal section is as follows:

'Whenever the Supervisor [of Banking] shall deny an application for a license or shall revoke or suspend a license issued pursuant to this Act, or shall issue any specific order or demand, then such applicant or licensee thereby affected may, within thirty (30) days from the date of service of notice as provided for in this Act, appeal to the Superior Court for the State of Washington for Thurston County. The appeal shall be perfected by serving a copy of the notice of appeal upon the Supervisor and by filing it, together with proof of service, with the Clerk of the Superior Court of Thurston County. Whereupon the Supervisor shall, within fifteen (15) days after filing of such notice of appeal, make and certify a transcript of the evidence and of all the records and papers on file in his office relating to the order appealed from, and the Supervisor shall forthwith file the same in the office of the Clerk of said Superior Court. The reasonable costs of preparing such transcript shall be assessed by the Court as part of the costs. A trial shall be had in said Superior Court de novo. The applicant or licensee, as the case may be, shall be deemed the plaintiff and the State of Washington the defendant. Each party shall be entitled to subpoena witnesses and produce evidence to sustain or reverse the findings and order or demand of the Supervisor. During the pendency of any appeal from the order of revocation or suspension of a license, the order of revocation theretofore entered by the Supervisor shall be stayed and any other order or demand appealed from may be stayed in the discretion of the Court. Either party may appeal from the judgment of said Superior Court to the Supreme Court of the State of Washington as in other civil actions.' Laws of 1941, chapter 208, § 23, Rem.Supp.1941, § 8371-23. (Italics ours.)

At the trial each side presented its evidence to the superior court. It was appellant's position that by a trial de novo was meant a trial after which, without regard to the supervisor's order, the superior court could decide whether or not one or both of the licenses sought should be issued. On the other hand, respondent contended that the superior court's inquiry was limited to whether or not the supervisor had abused his discretion and had acted arbitrarily or capriciously. The trial court at the outset took appellant's view as to the extent and character of the inquiry contemplated by the statute, and admitted evidence on that theory. After the trial was concluded, the trial court in its memorandum decision reversed its first ruling and held that it had been wrong as to the permissible extent and scope of the inquiry and announced that it would consider the evidence only to the extent of determining whether or not the supervisor had acted arbitrarily or capriciously.

The extent of the review contemplated by the italicized portion of this section constitutes the crux of this controversy.

The trial court correctly interpreted the phrase 'trial de novo' as used in the above quoted section of the statute when it said that the phrase

'* * * means a new and independent trial on the law and facts from which the Superior Court shall determine whether or not in this case the license should be granted in view of all the facts and circumstances as disclosed by the evidence and the law applicable to the case.'

It was also correct in its ultimate conclusion that the scope of its inquiry under the statute was limited to determining whether or not the supervisor had acted arbitrarily, capriciously, or contrary to law.

These two rulings of the trial court are not inconsistent with each other because the superior court's original construction of the appeal section of the statute, based upon what seems to us the true legislative intent, would render the italicized sentence of Rem.Supp.1941, § 8371-23, unconstitutional.

The appeal there provided for goes beyond anything provided by way of court review in any of the drafts of the uniform small loan act, as set forth in Hubachek, 'Annotations on Small Loan Laws.' The legislature in enacting this statute expressed dissatisfaction with what it may have considered to be prior judicial abdication in reviewing the orders of administrative boards and commissions, which have been uniformly upheld in the absence of a showing that they were arbitrary, capricious, or contrary to law.

We are convinced that the legislature, whether or not it was dissatisfied with the application of the arbitrary or capricious test, with its minimum of judicial review to determine the validity of administrative action, has attempted to place in the superior court for Thurston county powers with which it cannot constitutionally be invested.

It seems unnecessary to labor the fundamental doctrine of the constitutional division of powers and the reasons therefor. In this state, the legislative power is 'vested in the legislature, consisting of a senate and house of representatives,' but with the powers of initiative and referendum reserved to the people, Washington constitution, Art. II, § 1, as amended in 1912 by the seventh amendment; the judicial power of the state is 'vested in the supreme court, superior courts, justices of the peace, and such inferior courts as the legislature may provide', Art. IV, § 1; and the executive department consists of the governor and other officers named in Art. III, § 1 of the constitution, with the 'supreme executive power' vested in the governor. Art. III, § 2.

We recognize that definite and analytical lines marking the separation of powers have not been and cannot be drawn. There is necessarily some mingling and overlapping of powers between the three separate departments of our government. People ex rel. Rusch v. White, 1929, 334 Ill. 465, 166 N.E. 100, 64 A.L.R. 1006; State v. Huber, 1946, 129 W.Va. 198, 40 S.E.2d 11, 168 A.L.R. 808. The separation of governmental powers

'* * * is not a doctrinaire concept to be made use of with pedantic rigor. There must be sensible approximation, there must be elasticity of adjustment, in response to the practical necessities of government, which cannot foresee to-day the developments of tomorrow in their nearly infinite variety.' Mr. Justice Cardozo in his dissenting opinion in Panama Refining Co. v. Ryan, 293 U.S. 388, 55 S.Ct. 241, 257, 79 L.Ed. 446.

It is the fusion of the different types of governmental power to deal with specific problems which has resulted in the development of the administrative process. Schwartz, American Administrative Law 18.

However, we are not here concerned with a twilight-zone situation. The licensing and regulation of small loan companies (which are permitted to make loans at rates which had been theretofore unlawful and which are still unlawful when made by anyone except such a licensee) is an exercise of the police power and essentially a legislative and administrative function. Cavanaugh v. People, 1916, 61 Colo. 292, 157 P. 200, cited and approved in Kelleher v. Minshull, 1941, 11 Wash.2d 380, 119 P.2d 302; People v. Stokes, 1917, 281 Ill. 159, 118 N.E. 87; State ex rel. Downing v. Powers, 1932, 125 Ohio St. 108, 180 N.E. 647; People v. Blumenthal, 1936, 157 N.Y.Misc. 943, 284 N.Y.S. 873; State v. Huber, supra.

It is clear that no 'elasticity of adjustment' can make the determination relative to the issuance of a license to operate a small loan business essentially or primarily a judicial power. If the statute had provided that applications for such licenses should be made to the superior court for Thurston county in the first instance, and had thereby charged that court with the responsibility of determining whether or not such licenses should issue, it would be agreed by everyone that the statute had imposed a nonjudicial power upon the court and that the portion of the statute so providing was unconstitutional. The addition of another step (original application to the supervisor of banking) does not place that determination any more within the scope of judicial power if, when the matter comes to the court, it is to be disposed of in the same manner as though it had originated there and without regard to the action of the supervisor from which the appeal is taken.

We are constrained to hold that the portion of Rem.Supp.1941, § 8371-23, which purports to vest in the superior court for Thurston county the right to reverse on a trial de novo a decision of the supervisor with reference to the granting of such a license and, in effect, to substitute its judgment for that of the supervisor as to whether or not a license should issue, is unconstitutional as an attempt to vest a nonjudicial power in a constitutionally created court. We must reject this expansion of the court's power as firmly as we would resist a reduction of its rightful authority. Hunstiger v. Kilian, 1915, 130 Minn. 474, 153 N.W. 869; Peterson v. Livestock Comm., 1947, 120 Mont. 140, 181 P.2d 152. See, also, Silven v. Osage County Commissioners, 1907, 76 Kan. 687, 92 P. 604, 13 L.R.A.,N.S., 716; Danielley v. City of Princeton, 1933, 113 W.Va. 252, 167 S.E. 620.

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