State v. Superior Court for King County, 23089

• Decision Date: 02 April 1931
• Docket Number: 23110,23111.,23089
• Citation: 161 Wash. 550,297 P. 774
• Parties: STATE ex rel. DUNBAR, Atty. Gen., v. SUPERIOR COURT FOR KING COUNTY et al. STATE ex rel. JOHNSON, Director of Efficiency, v. SAME. SAME v. SUPERIOR COURT FOR KING COUNTY.
• Court: Washington Supreme Court

297 P. 774

161 Wash. 550

STATE ex rel. DUNBAR, Atty. Gen., v. SUPERIOR COURT FOR KING COUNTY et al.

STATE ex rel. JOHNSON, Director of Efficiency, v. SAME.

SAME v. SUPERIOR COURT FOR KING COUNTY.

Nos. 23089, 23110, 23111.

Supreme Court of Washington, En Banc.

April 2, 1931

Original petition by the State, on the relation of John H. Dunbar Attorney General, and by the State, on the relation of Harry C. Johnson, as Director of Efficiency, etc., for writs of review directed to Superior Court for King County, and others, and application by the State, on the relation of Harry C. Johnson, as Director of Efficiency, etc., for writ of prohibition against the Superior Court for King County.

Rulings of trial court affirmed and alternative writ of prohibition quashed, and permanent writ denied.

Caldwell & Lycette and Dean H. Eastman, all of Seattle, for respondents.

Greene & Henry and Cassius E. Gates, all of Seattle, amici curiae.

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 section 13, chapter 169, Laws of 1919, as modified by a later act (Laws 1925, Ex. Sess. p 406, § 8, Rem. Comp. St. Supp. 1927, § 3735 1/2), filed his complaint in the superior court, seeking the appointment of a receiver for the Puget Sound Savings & 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.

1. 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 names the state auditor as the person in charge of savings and loan associations, but by section 8, p. 406, Laws of the extraordinary session of 1925, Rem. 1927 Supp., § 3735 1/2, 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 statute touching the question we are now considering is the latter part of section 13, chapter 169, Laws of 1919, 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 implied, 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...