State ex rel. Miller v. Taylor

• Decision Date: 11 February 1914
• Citation: 145 N.W. 425,27 N.D. 77
• Parties: STATE ex rel. MILLER, Atty. Gen., et al. v. TAYLOR, State Insurance Com'r, et al.
• Court: North Dakota Supreme Court

27 N.D. 77

145 N.W. 425

STATE ex rel.

MILLER, Atty. Gen., et al.

v.TAYLOR, State Insurance Com'r, et al.

Supreme Court of North Dakota.

Dec. 29, 1913.

Rehearing Denied Feb. 11, 1914.

Syllabus by the Court.

By chapter 194, Laws of 1913, entitled, “An act establishing a State Bonding Department in the office of the Commissioner of Insurance, providing for the maintenance thereof, and creating a reserve therefor; prescribing the duties of officers connected therewith; providing for the payment of premiums and indemnities for losses, and providing for the disposal of the surplus after such reserve has been created”-it was attempted to establish a Bonding Department, to bond certain county, city, village, township and school district officials, at the expense of the subdivisions of which they are officials. It is held:

Following State v. Budge, 14 N. D. 532, 105 N. W. 724 (the Capitol Commission Case), that said chapter 194 is invalid as an unwarranted delegation of legislative power to administrative officers, for the reason that said chapter provides for the payment of premiums by the subdivisions of the state, which premiums constitute a bonding fund, and it attempts to give to the Commissioner of Insurance the arbitrary power to determine how much of such fund shall be applied to the payment of losses and how much to the payment of deputies, clerk hire, and other expenses of the department, and particularly because no limitation is placed upon the amount which may be devoted to the last-mentioned subject.

Following State v. Blaisdell, 22 N. D. 86, 132 N. W. 769, Ann. Cas. 1913E, 1089, said chapter 194 is invalid as an unwarranted delegation of judicial power to purely administrative officials, in that it commits to the Commissioner of Insurance the sole right to determine the amount due subdivisions whose officials are insured, by reason of any default or violation of official duties, and also delegates to the auditing board the power to determine when bonds of insured officials shall be canceled, which are judicial functions.

Said chapter 194 is also invalid because it provides for taking the property of counties, cities, and other subdivisions of the state, without due process of law, in that it is an attempt to authorize the Commissioner of Insurance to determine the amount due to any such subdivision whose official it is claimed has defaulted, or been guilty of malfeasance in office, without notice to such subdivision, or any opportunity for a hearing on the subject, or any other provision for determining, by means of any channel for the administration of justice, any question of liability which may arise between the subdivisions and the Bonding Department. It is attempted to constitute the Insurance Commissioner the judge and the jury, as well as the custodian, of the fund, and to impart to him the power to serve in these conflicting capacities.

Additional Syllabus by Editorial Staff.

“Due process of law” requires notice and an opportunity to defend. The notice of the proposed course of action which will result in the taking of life, liberty, or property must, in order to be due process, be reasonable in time, so as to give a real opportunity to present defenses, and this right to due process must rest upon a basis more substantial than favor or discretion.

Original application by the State, on relation of Andrew Miller, Attorney General, and another, against Walter C. Taylor, State Insurance Commissioner of North Dakota, and another, for the issuance of its writ prohibiting and enjoining the Commissioner of Insurance of the state from putting into effect the provisions of chapter 194, Laws of North Dakota for 1913, requiring him to establish a Bonding Department, to go into operation on the 1st day of January, 1914. Writ granted.

Burke, J., dissenting.

Lawrence & Murphy and Pierce, Tenneson & Cupler, all of Fargo, and Bangs, Netcher & Hamilton, of Grand Forks, for relators. Andrew Miller, Atty. Gen., and John Carmody and Alfred Zuger, Asst. Attys. Gen., for defendants.

SPALDING, C. J.

This is an original application to this court for the issuance of its prerogative writ to prohibit and enjoin the State Commissioner of Insurance from proceeding to establish and put into operation a State Bonding Department. It is designed to test the constitutionality of chapter 194 of the Laws of 1913, entitled “An act establishing a State Bonding Department in the office of the Commissioner of Insurance, providing for the maintenance thereof, and creating a reserve therefor; prescribing the duties of officers connected therewith; providing for the payment of premiums and of indemnities for losses, and providing for the disposal of the surplus after said reserve has been created.”

Section 1 of such act reads: “A Bonding Department of the State of North Dakota is hereby established under the management and supervision of the Commissioner of Insurance.”

Section 2 authorizes the Commissioner of Insurance to appoint a deputy and engage clerks as may be necessary to conduct the business of the State Bonding Department, fix the salaries therefor, and provides that they shall be paid out of the Bonding Department Fund.

Section 3 requires such Bonding Department to bond counties, cities, towns, townships and school districts, in any county in the state, against losses by default of any officer, upon the terms and in the manner later set forth in such act, and that the Commissioner shall draw up, with the assistance of the Attorney General, a standard form of surety bond, which only shall be used.

Section 4 provides that each county official, except justice of the peace and constable, every assessor required by law to furnish a bond, every city, town, school district, and township treasurer required by law to furnish a bond, shall be bonded by the State Bonding Department, with this proviso: That it shall not bond any official for a greater amount than $50,000, and any official required to be bonded in a greater sum than $50,000 shall bond, as to the excess, with a responsible surety company or in any manner satisfactory to the proper authorities. It further makes it optional with township and school district treasurers to be bonded by the State Bonding Department, and requires the premiums on all bonds furnished by that department to be paid out of the appropriate public treasury.

Section 5 fixes a flat rate of premium on bonds of all officers at 25 cents per hundred dollars of bonds per year, to be paid in advance by the proper authorities to the State Treasurer, and that the minimum premium on small and short term officers' bonds shall not be less than $2.50.

Section 6 provides that money paid into the state treasury for premiums for bonding officials shall be known as the state bonding department fund, and used as provided in the act.

Section 7 prescribes the duties of the State Treasurer in regard to receiving premiums and issuing receipts, etc.

Section 8 requires all bonds issued by the department to run until the expiration of the officer's term of office, and provides that, when such term is less than one year, a full year's premium shall be charged.

Section 9 requires the Commissioner of Insurance to estimate, at the beginning of each year, the amount required for salaries and expenses of the department for the current year, and to reserve the same from the premiums received, and makes the amount of premium receipts remaining available for payment of losses. It requires losses to be paid promptly as soon as the amount shall be determined by the Commissioner of Insurance and a report thereof made, and that any sum remaining unexpended at the end of any year shall remain in the state bonding fund until the amount of $100,000 is accumulated, after which any excess over that sum shall be distributed to the various counties, etc., in proportion to the amount of premiums paid into the fund by the same, and that, in case there are not sufficient funds to meet the losses sustained after the reservation of expenses for the year, such losses shall be paid as funds are accumulated in the bonding fund by the collection of premiums.

Section 10 provides for reports to be published and made to the Governor and legislative assembly.

Section 11 requires the Commissioner to obtain from the various bonded officials annual statements of their receipts and disbursements, etc., verified by an officer, and provides how the Commissioner shall verify such statements, and requires him to furnish application blanks to the proper officers. It then provides that if, in the opinion of the Commissioner of Insurance, “it is advisable for the safety of the state to reject an application for a bond or cancel the bond of any official bonded, that he shall submit such application, also the person's name whose bond he proposes to cancel, to the State Auditing Board, together with his reasons for rejecting or canceling the same, and if the Auditing Board rejects such application or cancels any bond, such official may bond in any manner satisfactory to the proper authorities of the city, village, school district, township or county, as the case may be.” It then provides for notice of the rejection of any application by the board being given to the official, and that before a bond is canceled the Commissioner shall notify such person by registered mail, demanding from him a receipt thereof, and upon the return of such receipt that the board shall cancel such bond six days thereafter, and that, when a default is reported, the Commissioner shall carefully inquire into and investigate the same before the indemnity is paid; that the State Examiner shall examine and check the accounts of a defaulting official, and file his report with the Commissioner of Insurance, stating the amount due upon the defaulting officer's bond.

Many grounds are presented by the applicant upon which he claims the statute is in conflict with the Constitution. It will...