Opinion
As Modified Nov. 3, 1941.
Rehearing Denied Nov. 12, 1941.
Hearing Granted Dec. 11, 1941.
Petition by Ralph W. Evans, as Building and Loan Commissioner, against the Superior Court of Los Angeles County, for a writ of mandate to compel respondent court to set aside order recalling and quashing a writ of execution, directing stay of execution, and declaring the effect of a judgment.
Alternative writ discharged and peremptory writ denied. COUNSEL
Alan G. Campbell, of Los Angeles, for petitioner.
J. H. O’Connor, Co. Counsel, and Douglas De Coster, Deputy Co. Counsel, both of Los Angeles (Mathes & Sheppard and J. Stanley Mullin, all of Los Angeles, of counsel), for respondents.
OPINION
WHITE, Justice.
Petitioner seeks by this writ of mandate to compel respondent court to set aside its order denying a motion for an order recalling and quashing a writ of execution, directing stay of execution and declaring the effect of a certain judgment.
A chronological review of the litigation which forms the background leading up to the pending petition for a writ of mandate may be thus epitomized: On May 23, 1936, one Terry and others were the owners of Fidelity definite term investment certificates issued by Pacific States Savings and Loan Company, a corporation (hereinafter referred to as "Pacific States"), in the principal amount of $12,086.89, and were also holders of Fidelity Participating certificates issued by Pacific States in the nominal face amount of $4,028.96. On the above-mentioned date the aforesaid certificates matured and became payable. Subsequent demands met with refusal of payment thereof. On September 30, 1937, Terry et al. filed an action (hereinafter referred to as the Terry action) against Pacific States to recover the principal and interest due on said Fidelity definite term certificates and to recover that portion of the nominal face amount of the participating certificates acknowledged by Pacific States to be due.
On June 12, 1939, judgment was rendered by respondent court in the Terry action in favor of the plaintiffs therein and against Pacific States for the sum of $15,696.71. Pursuant to section 674 of the Code of Civil Procedure, abstracts of the judgment were recorded with the county recorders of Los Angeles county, Alameda county, and the city and county of San Francisco, on August 18, October 18, and September 5, 1939, respectively. On August 10, 1939, a motion for a new trial was denied, and on August 17, 1939, notice of appeal was filed by Pacific States. No undertaking on appeal to stay the execution of the judgment was filed. On August 26, 1940, the Terry judgment was affirmed as modified by this court.
The writ of execution which is the subject of the instant mandamus proceeding was issued upon the judgment in the Terry action on August 23, 1939. On August 25, 1939, the sheriff of the city and county of San Francisco, pursuant to said writ of execution, levied upon all moneys, debts and credits due Pacific States from Wells Fargo Bank and Union Trust Company, Union Trust office and head office, San Francisco, and American Trust Company, savings account office and head office, San Francisco.
On March 4, 1939, petitioner herein, as building and loan commissioner of the state of California, took possession of Pacific States pursuant to the provisions of section 13.11 of the Building and Loan Association Act of California (Stats.1931, p. 483; Deering’s Gen. Laws, Act 986), which statute will be hereinafter referred to as the "act". On or about March 5, 1939, however, Pacific States applied to the Superior Court of the State of California, in and for the County of San Francisco, to enjoin further proceedings by the building and loan commissioner, this proceeding being brought pursuant to section 13.12 of the act. Said action is entitled, "Pacific States Savings and Loan Company, plaintiff v. Ralph W. Evans, individually and as Building and Loan Commissioner of the State of California, defendant", and is numbered 286711 in the records of said superior court. The court, after citing the commissioner to show cause why further proceedings should not be enjoined, commenced on March 20, 1939, to hear the allegations and proofs of the parties to determine the facts and whether upon the merits the application of Pacific States should be dismissed or whether the commissioner should be enjoined from further proceedings and the business, property and assets returned and surrendered to Pacific States by the commissioner. For the purpose of brevity and convenience, this proceeding will hereinafter be referred to as "the injunction proceeding". It is contended in the instant proceeding and not denied that such action is still pending, has not been determined, and that evidence therein is still being introduced.
On August 30, 1939, Pacific States filed in the Terry action a "petition to recall and quash execution" and procured a temporary restraining order enjoining the further enforcement of the writ of execution pending determination of that petition.
On October 30, 1939, the commissioner for the first time filed his "notice of determination to liquidate the business and affairs of Pacific States", which notice he filed pursuant to section 13.16 of the act.
On November 8, 1939, respondent court denied the petition of Pacific States to recall and quash execution. Two days later the commissioner filed in respondent court a separate collateral suit in equity to enjoin the enforcement of the writ of execution, said action being directed against Earl S. Terry and Russell B. Mullens, as trustees, etc., and Daniel C. Murphy, sheriff of the city and county of San Francisco. This action is numbered 446479 in the records of said court. Further enforcement of the writ of execution was restrained pending the trial and determination of the last-mentioned action. On March 16, 1940, the action came on regularly for trial in the Superior Court of Los Angeles County, and at the conclusion of such trial the judge indicated his intention to render judgment for the plaintiff, but up to this date no such judgment has been formally rendered or entered. On August 2, 1941, the commissioner filed in the Terry action his "motion for order recalling and quashing execution, directing stay of execution and declaring the effect of the judgment herein". Such motion came on for hearing on August 15, 1941, and respondent court made its order denying the motion in question. On September 4, 1941, the commissioner filed in this court the petition for a writ of mandate which is now before us.
Respondent court appeared by demurrer and answer, the latter of which does not controvert the facts hereinbefore narrated. By its demurrer respondent court urges that the petition for the writ does not state facts sufficient to constitute a cause of action, for the asserted reason that the writ of mandate cannot be used to prescribe the decision of an inferior tribunal, but only to compel the performance of a ministerial act or the compliance with a plain duty ordained by statute. We do not question the general rule as being that while mandate may be used to compel an inferior tribunal, board or officer to exercise its discretion or judgment, it may not be resorted to as a means of coercing such board or officer or inferior tribunal’s discretion by directing the manner in which such discretion or judgment shall be exercised. However, it has been uniformly held that if an inferior tribunal acts arbitrarily against vested rights granted by law, and therefore against the law itself, such inferior tribunal has not strictly, as is frequently said, "abused its discretion"--a term which is responsible for some confusion of ideas on this subject--, but, in contemplation of law, under those circumstances the inferior tribunal has not exercised its discretion at all, but has sought to substitute its arbitrary determination in opposition to legally guaranteed rights. In such cases a reviewing court will by mandate compel a recognition by the officer, board, commission or inferior tribunal of these legal rights and compel conformity with the law. Furthermore, the issuance or denial of a writ of mandate is not altogether a matter of right, and as was said by our Supreme Court in the recent case of Betty v. Superior Court, 18 Cal.2d 619, 116 P.2d 947, 949, the determination to grant or refuse such a writ "rests to a considerable extent, in the discretion of the court to which application therefor is made" (citing cases) "and a conclusion should be reached which will promote justice". If, therefore, in the instant case the petitioner has shown that respondent court by denying the aforesaid motion has refused to perform a clear legal duty not involving the exercise of any discretion, then the writ should issue. We have therefore concluded to overrule the demurrer.
Our consideration of the questions presented upon the merits of this controversy leads us to believe that a peremptory writ of mandate should be denied, for the reason that respondent court properly denied petitioner’s motion to recall and quash execution, direct stay of execution and declare the effect of judgment. The motion with which we are here concerned was made upon the grounds "that ever since March 4, 1939, the property, business and assets of Pacific States Savings and Loan Company, hereinafter sometimes referred to as ‘Pacific States’, have been, and they now are in the possession of the Building and Loan Commissioner of this state, pursuant to the authority vested in him by the Building and Loan Association Act; that the said Building and Loan Commissioner determined to liquidate Pacific States; that he did, on October 30, 1939, file with the Superior Court of the State of California, in and for the City and County of San Francisco, written notice of his determination to liquidate Pacific States; that no attachment was levied or lien created herein within thirty days next preceding the taking of possession of Pacific States by the said Commissioner, and that the process of liquidation of Pacific States has not been completed and is still pending."
Section 13.11 of the act empowers the commissioner, when he has determined the existence of certain facts in connection with the operation of any building and loan association, to forthwith demand and take possession of the property, business and assets of such association and to retain such possession until said association shall, with the consent of the commissioner resume business, or until its affairs be liquidated. In the instant case the commissioner, acting under section 13.11, took possession of Pacific States on March 4, 1939.
Section 13.12 of the act provides that whenever the commissioner in the exercise of his powers takes possession of the assets, business and property of an association, and the latter deems itself aggrieved thereby, it may within thirty days after such taking apply to the superior court of the county wherein is located its principal place of business to enjoin further proceedings, and such court, after citing the commissioner to show cause why further proceedings upon his part should not be enjoined, and after hearing the allegations and proofs of the parties, and determining the facts, may upon the merits dismiss such application or enjoin the commissioner from further proceedings and direct him to surrender such business, property and assets to the association. In connection with the petition now before us, it should be noted that such an injunction proceeding was regularly instituted and remains undecided and pending in the superior court of the city and county of San Francisco, the object of which injunction proceeding is to test the validity and justification of the commissioner’s action in taking over Pacific States. Should the superior court in the last-mentioned proceeding decide that the taking over by the commissioner was unwarranted, then the latter must return the business, property and assets of the association to it and will be enjoined from proceeding to liquidate the affairs of such association.
Section 13.16 of the act prescribes the powers and duties of the commissioner while acting as liquidator in the event liquidation is authorized by judicial decree and determined upon by the commissioner. In the eighth paragraph of section 13.16 it is provided that "the determination by the commissioner to liquidate any association, evidenced by filing written notice of such determination with the court, shall operate to stay or dissolve any or all actions or attachments instituted or levied within thirty days next preceding the taking of possession of such association by the commissioner, and pending the process of liquidation as herein provided no attachment or execution shall be levied or lien created upon any of the property of such association".
To us it is evident from the provisions of the law herein quoted that there are two separate and distinct processes involved in the intervention of the commissioner in the affairs of a building and loan association when he determines to liquidate one. First, he may take over control of the association, whereupon such association may seek to enjoin him from liquidation proceedings and require him to return its business, assets and property. Second, he may liquidate the association only when, by judicial decree, he is authorized so to do. A mere reading of the eighth paragraph of section 13.16 makes it clear that while the commissioner is merely "in possession" of the business of the association he may enjoin only those writs of execution issued in actions commenced within thirty days prior to the date of his taking possession. Concededly, the Terry action does not come within this provision of the statute. The prohibition of the statute against the levy of attachment or execution or the creation of any lien upon any of the property of the association arises and exists only pending the process of "liquidation", when the same is authorized by the statute. Manifestly, in the case of Pacific States the commissioner has done nothing toward liquidation, nor was he authorized to "liquidate" the affairs of the association until determination of the judicial proceedings contemplated by the Building and Loan Association Act. The holders of the judgment in the Terry action being creditors of the association and being without the pale of the thirty-day prohibition period aforesaid, their right to execution upon the judgment obtained by them against the association remains unimpaired and unchanged until there is a judicial determination of the proceedings instituted by the association challenging the validity and justification of the taking over of its business by the commissioner. Until Judicial approval of his action in taking over the business, assets and property of the association is obtained by the commissioner, the right of action against the association by creditors remains exactly the same as if the association’s business were being conducted by it in the usual and ordinary course, subject only to the thirty-day stay against actions or attachments heretofore set forth.
We find authority for our holding in this regard in the interpretation placed by the Supreme Court on the former California Bank Act (Stats.1895, p. 175), which provided for a procedure identical with the procedure set forth in the present Building and Loan Association Act, save and except that the injunction suit under the Bank Act was brought by the attorney general instead of by the building and loan association. The injunction suit under the Bank Act, however, was for the same purpose as the similar proceeding authorized by the Building and Loan Association Act, viz., to determine whether the taking of possession was justified and liquidation should be allowed. That a creditor was entitled to pursue his claim to judgment and execution as well during the period that the banking institution was in "possession" of the commissioner and prior to a judicial declaration as provided in the act, was the holding in Lanz v. Fresno Loan & Savings Bank, 125 Cal. 456, 58 P. 63; and Argues v. Union Savings Bank, 133 Cal. 139, 65 P. 307. See, also, West Virginia Utilities Co. v. Dura Glass Mfg. Co., 99 W.Va. 193, 128 S.E. 86; Britten v. Sheridan Oil Co., 205 Iowa 147, 217 N.W. 800; Marshall v. Wabash R. R., 201 Mich. 167, 167 N.W. 19, 22, 8 A.L.R. 435; Johnson v. Garner, D.C., 233 F. 756, 777; Waggy v. Jane Lew Lbr. Co., 69 W.Va. 666, 72 S.E. 778. Clark on Receivers, 2d Ed., 1929, p. 836, states the rule as follows: "The chancery court does not by the appointment of a receiver get such control of the assets of the partnership as to enable it to prevent the firm’s creditors from proceeding at law to judgment and execution and levy upon the assets. * * * (Citing cases) * * * The reason for such a ruling is that, up to the decree of dissolution, the proceedings were within the control of the parties and suit might at any time be discontinued. After the decree of dissolution, creditors may be enjoined because then the court provides a mode of collecting the claims."
We therefore hold that only upon judicial determination by the Superior Court in favor of the commissioner in the aforesaid injunction suit prescribed by the statute, does the building and loan association go into liquidation, and that until such judicial determination throwing the association into liquidation at the discretion and upon the order of the commissioner, the association is not protected from the suits of creditors nor from the levy of executions obtained as in the Terry case with which we are here concerned.
The demurrer interposed by respondent court is overruled. Upon a consideration of the merits of the cause as presented by the petition and answer thereto, and for the reasons hereinbefore stated, the alternative writ heretofore issued is discharged and the peremptory writ prayed for is denied.
YORK, P. J., and DORAN, J., concurred.