State ex. rel. Dakota Trust Co. v. Stutsman

Bruce, J. (after stating the facts as above). The stipulation entered into by the parties cannot be carried out by this court. The original proceeding was a proceeding for a writ of prohibition. No petition for mandamus was presented to the trial court, and to allow the proceeding to be converted into a proceeding for mandamus in this — 77 — court would be for us to assert an original jurisdiction, which the Constitution has not granted to us. As far, too, as the writ of prohibition is concerned, the question is now largely a moot question, the original bonds having expired. The questions involved, however, are of so great public interest, and the real merits of the controversy are still so unsettled, that we can and will consider the questions involved. Boise City Irrig. & Land Co. v. Clark, 65 C. C. A. 399, 131 Fed. 415; Be Morgan, 114 App. Div. 45, 99 N. Y. Supp. 775; Re Kaeppler, 7 N. D. 307, 75 N. W. 253; People ex rel. Spire v. General Committee, 25 App. Div. 339, 49 N. Y. Supp. 725; Coleman v. MacLennan, 78 Kan. 711, 20 L.R.A.(N.S.) 361, 130 Am. St. Rep. 390, 98 Pac. 283. We cannot, however, order the entry of any judgment on the theory of a mandamus proceeding, but on that of a proceeding for a writ of prohibition alone. In considering this case we must bear in mind that it is presented by demurrer to the return or answer, and that, such being the case, the allegations of the answer must be accepted as true, no matter what the real facts may be, and no matter what merit there might be in the petition if it were considered alone. The arguments and briefs of counsel, however, so confuse the issues raised by mandamus and prohibition that we will discuss this case more or less from the standpoints of both proceedings. This is not a case where the board of railroad commissioners has refused to approve bonds, and, in refusing to do so, has relied upon its belief that its exercise of discretion need not be accounted for, and that no reason need be given therefor, but a case in which the commissioners have justified their refusal in their answer, and have given reasons therefor. The petitioner trust company contends that the power and duty of the board of railroad commissioners are limited and confined by the language of § 2247 of the Bevised Codes of 1905, which requires the warehousemen to file with the board a bond running to the state, “with good and sufficient sureties to be approved by such commissioners in the penal sum of not less than $5,000, nor more than $75,000 in the discretion of the commissioners, conditioned for the faithful performance of their duty as public warehousemen, and compliance with the laws of this state. . . . Such bond . . . shall be in a sufficient amount to protect the holders of outstanding tickets.” It con — 78 — tends that tbis statute makes it tbe duty of tbe board to examine and determine tbe sufficiency of tbe bond with respect to amount and form alone, and not with respect to tbe moral or other qualifications of tbe bondsmen. It further claims that since §§ 4455 and 4456 of tbe Revised Codes of 1905 permit trust companies to be sole sureties where tbe law would require two or more personal sureties, and § 4679 of tbe Revised Codes of 1905 requires certain deposits to be made by such corporations with tbe state treasurer, and that when the deposits have been made the state treasurer shall so certify, and § 4682, Rev. Codes 1905, provides that tbe state treasurer’s certificate provided for in § 4679 “shall, until revoked, be conclusive evidence of the qualification of such corporation and of its authority to become and be accepted as such surety,” and § 4459 of tbe Revised Codes of 1905 provides that tbe above-mentioned state treasurer’s certificate shall be filed with tbe insurance commissioner, and that thereupon tbe insurance commissioner issues bis certificate of authority to do business, and §§ 469C> and 4692 provide for supervision and examination of such companies by tbe insurance commissioner, and § 4464 of the Revised Codes of 1905 provides that such company shall be conclusively presumed to be sufficient surety on any risk within tbe limit of 10 per cent of their capital; in tbe case of a surety bond tbe only duty left for tbe board of railroad commissioners is to inquire into tbe form and amount of the bond, and whether or not tbe surety is authorized to do business, and whether or not the risk is within its limit, and that the financial and moral responsibility of the company within that limit is conclusively presumed. It claims that the board has no right to inquire into the moral character or the past dealings of the surety company, and that that matter is for the insurance commissioner alone, and that until he revokes the license of such company, the company must be conclusively presumed to have a good business character and to be abundantly responsible, and that its bond must be accepted by the board. It further contends that the board is expressly limited by § 2242, as amended by chap. 230, p. 333, Laws of 1909, which grants it the following powersr (a) To supervise the handling, weighing, and storing of grain and' seed; (b) to establish rules and regulations (1) for weighing, (2) for management of warehouses; (c) to investigate complaints of fraud and oppression in the grain trade; (d) to correct such frauds or op — 79 — pression so far as may be in tbeir power; (e) to revoke warehouse licenses for cause upon notice and bearing. The board of railroad commissioners, however, contend that § 2247, Eev. Codes, 1905, requires the warehousemen to file with the board a bond running to the state, "with good and sufficient sureties to be approved by such commissioners” and that it is their duty to ascertain whether the bond is good and sufficient, and that a good and sufficient bond means a bond which is both given by a surety which is financially responsible and reliable, and which is accustomed to fair dealing, and that such bond must be sufficient to cover all losses. They claim that if the capital of the trust company is limited to $100,000, as it is in this case, they are justified in holding, or, at any rate, have the right to hold, that such surety is by no means sufficient if the company has issued bonds within the state, or to the commission, amounting to many hundreds of thousands of dollars; and that it is for them to inquire into such sufficiency. They also insist that they have the right to inquire into the previous dealings and business methods of the surety. Counsel for the trust company insists that when the board seeks to inquire into the past or the previous transactions of the bondsmen, it is seeking to hear and determine the merits of the bondsmen’s controversies with the beneficiaries under previous bonds, and the extent of its liability or the validity of its settlements with them, and in such case is assuming judicial functions which have not been intrusted to it, and which, by § 85 of the Constitution, belong exclusively to the courts. The board of commissioners in answer contend that it is in no way seeking to determine any rights or obligations, or to announce any judgment, but is merely seeking to ascertain whether the bond is good and sufficient ,or not, and that in such investigation it has the right to inquire into the past transactions of the surety and into their fairness. It also claims that § 2242, as amended by chap. 230, p. 333, of the Laws of 1909, vests in the board the power to investigate the complaints of fraud or oppression in the grain trade, and to correct such frauds or oppression so far as may be in their power; and that, in furtherance of such duties, it is not only their duty, but their power, to see that the bondsmen are reliable, both in financial sufficiency and in business integrity. Counsel for the bond company in reply insists that the approval of the bonds or the investigation of the sufficiency of the surety company or the — 80 — business customs of sucb surety, in no way refer to tHe grain trade, and are matters entirely apart from tbe same. Tbe powers wbieb bave been by statute conferred upon tbe board of railroad commissioners of North Dakota are quasi judicial. They belong to tbat twilight zone which lies between tbe ministerial or judicial, and tbe legislative, which it is so difficult to bound and define, but which it is nevertheless so necessary to recognize. Its recognition, indeed, is necessary to all scientific, social, and legal development. Such acts and duties are, it is true, often spoken of as being “ministerial,” but this is only for the purpose of distinguishing them from the actions and duties which belong solely to the courts, and which cannot be either delegated by or taken from them. See State ex rel. Gale v. Ueland, 30 Minn. 29, 14 N. W. 58; Wilkins v. State, 113 Ind. 514, 16 N. E. 192; State v. Hathaway, 115 Mo. 36, 21 S. W. 1081. The term “ministerial,” indeed, is generic rather than specific, and ministerial acts may be divided into two classes: (1) Those which are ministerial solely, and involve no judgment or discretion; and (2) those which are quasi judicial. To this latter class those now sought to be exercised by the board of railroad commissioners belong. Hartford F. Ins. Co. v. Raymond, 70 Mich. 485, 38 N. W. 474; Ramagnano v. Crook, 85 Ala. 226, 3 So. 845. That such powers may be delegated to such board is now well established. State v. Hathaway, 115 Mo. 36, 21 S. W. 1081; Wilkins v. State, 113 Ind. 514, 16 N. E. 192; Burke v. Collins, 18 S. D. 190, 99 N. W. 1113; Re Hoover (D. C.) 30 Fed. 51. Even where the duty to be performed is quasi jxidicial and involves the exercise of discretion on the part of the tribunal or officer, it is well established that mandamus will lie to compel such tribunal to take some action in the premises, and to exercise its judgment or discretion. In such cases, however, the function of the writ is merely to set in motion. It cannot be used to direct how the duty shall be performed or the discretion exercised, as such a use would amount to substituting the judgment or discretion of the court issuing the mandamus for that of the court or officer to whom it was committed by law. See 19 Am. & Eng. Enc. Law, 732 and cases cited: 26 Cyc. 158; High, Extr. Legal Rem. § 24; Broaddus v. Essex County, 99 Va. 370, 38 S. E. 177; American Casualty Ins. & Secur. Co. v. Fyler, 60 Conn. 448, 22 Atl. 494, 25 Am. St. Rep. 337, and notes thereto, and the notes to Dane v. — 81 — Derby, 89 Am. Dec. 728, 742; Decatur v. Paulding, 14 Pet. 497, 10 L. ed. 559. It seems, however, to be fairly well established that where it is clear that such judgment or discretion is abused and exercised arbitrarily or in a capricious manner, as where the discretion is made to turn upon matters which, under the law, should not he considered, mandamus will lie. (See 26 Cyc. 161 and cases cited; 19 Am. & Eng. Enc. Law, 737). There are, however, many dissenting decisions even upon this proposition, and many courts hold that mandamus will not lie to review such discretion no matter how unjustly or arbitrarily it may have been exercised. Shotwell v. Covington, 69 Miss. 735, 12 So. 260, and cases cited; Ramagnano v. Crook, 85 Ala. 226, 3 So. 845. A distinction, also, is quite generally made between those cases where the board relies, in its answer, upon the general presumption that it has properly exercised its discretion and those in which it seeks to justify its action and gives reasons therefor. The question for us to determine in this case is not whether, if the board had refused to give the reasons for its refusal to approve the bonds, this court would have interferred, but whether the reasons given for the refusal in the return to the writ show an arbitrary caprice and an abuse of discretion. We are inclined to believe that no abuse of discretion has been shown. The board was not, as counsel for the respondent suggests, trying merely a former dispute or seeking to put the appellant on trial for an alleged offense. They went, it is true, a little too far and had no right to attempt to force a settlement of prior claims. They were exercising in.the main, however, their discretion merely, and giving reasons therefor. They were seeking both to have the claims of the depositors settled, and to ascertain whether the bonds offered were good and sufficient; and we believe that the inquiry in regard to this matter should involve the question -of business custom and integrity as well as of financial responsibility, and that though it was for the insurance commissioner to say whether the trust company should do business within the state and could act as a bondsman at all, it was for the board of railroad commissioners who were intrusted by the statute with the duty of supervising the grain trade and protecting the ticket holders in the elevators, to exercise their •discretion as to what bondsmen they should accept, and reject any or all if they either disliked their business methods or thought that they had written more bonds than their capital would warrant. Surely this — 82 — duty would be tbe duty expected of the directors of any corporation, and it would seem that the same duty and responsibility was placed upon,, and should be intrusted to, the board of railroad commissioners. The respondents have, and had, the right to do business in North Dakota. They have no vested right, however, to do any particular kind of business with any particular person. Section 4455, Rev. Codes 1905, indeed, clearly intimates that no such corporation has, even though approved by the insurance commissioner, any inalienable right to do business within the state, but that its bonds must be first accepted and approved by the officers or boards to whom they are presented. Nor have they, or any other person, or corporation, by virtue of their permission to do business within the state, a vested right to recognition by the railroad commissioners, or by any other state board. That board can exercise its honest discretion, and it is responsible for the same solely to the people who have created it, provided that it does not interfere with any vested rights, which it has not in this case. The duties which under the statute are to be performed by the board while approving bonds are, as we before stated, quasi judicial and discretionary, and would not in any view of the law be subject to review by the writ of mandamus, except on a showing of a clear abuse of discretion. A purely ministerial act, indeed, is one which “a person performs in a given state of facts in a prescribed manner, in obedience to the mandate of legal authority, without regard to or the exercise of his own judgment upon the propriety of the act being done.” Flournoy v. Jeffersonville, 17 Ind. 169, 79 Am. Dec. 468. We know that there are cases in which it is held that the mere approving and accepting bail after it has been fixed by competent authority is a ministerial act solely (Ray v. Doughty, 4 Blackf. 115) ; but in these cases the question whether the act could be delegated was considered, rather than the question as to whether it could be compelled. So, too, there is a wide difference between an individual, such as a clerk of a court with no supervisory power and no quasi governmental responsibility, and that of a railroad commission such as the one before us. There is little difference, indeed, between the powers and responsibilities of the railroad commission of North Dakota and those of the board of commissioners in the case of State ex rel. Reynolds v. Tippecanoe County, 45 Ind. 501, and in which the court held that mandamus would not lie to compel the granting of a liquor license — 83 — even tbougb tbe statute prescribed the form of the application, and there was but little, if anything, for the commissioners to decide. ' Nor is there any material difference between the case at bar and the case of Shotwell v. Covington, 69 Miss. 735, 12 So. 260, where the court held that mandamus would not lie to compel the president of a board of supervisors to approve the bond of the clerk of the court. A very suggestive case is that of State ex rel. State Pub. Co. v. Smith, 23 Mont. 44, 57 Pac. 449. 'In this ease the statute provided for the letting of state printing contracts by the state board of examiners, of which the governor was a member. The act also provided that all contracts made by the board should be approved by the govern- or and state treasurer. The court held that the duty of such officers to approve a contract let by the board was not solely ministerial, but involved judicial discretion, and could not be controlled by mandamus. “The word ‘approve/ ” the court in its opinion says, “means ‘to pronounce good; think or judge well of; admit the propriety or excellence of; be pleased with; commend.’ (Century Diet, title ‘Approve.’) The Constitution does not define the extent to which they must go in the investigation of the action of the board, nor does it require that they must act together or state any reason for their actions. Yet from the very fact that their approval is indispensable, under the Constitution, the conclusion is irrestistible that their action is designed to be a check upon the action of the board. This is the implication from the terms used and the rule of construction, that every word of the instrument should be rendered operative. ... If this he true, in the discharge of their duty they must use their judgment and discretion as to all matters into which the hoard could or should inquire. This includes not only the pecuniary responsibility of the bidder, but his judgment, skill, ability, capacity, and integrity as well. . . . The governor having a general knowledge of the affiairs of the state, and presumptively being fitted by his superior qualifications to pass judgment upon the action of the board, it was thought proper by the constitutional convention that he should give the taxpayers the benefit of his judgment and discretion. The treasurer being in a position in which he is presumed to be especially informed as to the condition of the state’s finances, it was thought proper to require the exercise of his judgment and discretion also; the ultimate purpose was by this system of — 84 — counterchecks to secure economy and prevent favoritism. It is not for us to say whether the provision is a wise one or not. These officers, acting within the sphere of their constitutional duties, are accountable under their oaths to the people only, just as are the individual members of this court, and it is no part of our duties to inquire into their motives in withholding their approval from the contract let by the board to the relator. If they have acted arbitrarily, if they have chosen to pervert the functions of their high offices to vile, partisan uses, or to the purposes of favoritism as is suggested by the allegations of the affidavit ; we have no power to restore their consciences and to bring them to a sense of duty. The form in which they are to be judged is the minds and consciences of the people, whose servants they are and who alone can hold them responsible for the manner in which they perform their duties.” See also Oliver v. Wilson, 8 N. D. 590, 73 Am. St. Rep. 784, 80 N. W. 757; Ramagnano v. Crook, 85 Ala. 226, 3 So. 845; Swan v. Gray, 44 Miss. 393; State ex rel. Eaves v. Rickards, 16 Mont. 145, 28 L.R.A. 298, 50 Am. St. Rep. 476, 40 Rac. 210. We have examined the statutes relating to the duties of the insurance commissioner and of the board of railroad commissioners with some care, but we cannot agree with counsel for respondent that the duties of the latter board are confined merely to the ministerial act of seeing that the bond is sufficient in form, and that the action of the insurance commissioner, in admitting the companies to do business within the state, is conclusive as to their financial responsibility and business integrity, so that the railroad commissioners, and, on the same reasoning, every other state officer and board, will be compelled to accept them as bondsmen, no matter what their dealings in the past may have been, or no matter how much in excess of their capital stock and of their deposit with, the state their obligations may be. We believe, in short, that the appellants’ contentions as to the power and prerogative of the board are in the main correct, but, as we have before stated, no mandamus proceeding is technically before us. When we come to consider the question from the standpoint of a petition for a writ of prohibition, we must take as established the above propositions as to the general power of the board in approving and canceling bonds, but we are constrained to hold that in the case at bar it exceeded its powers. We believe that the board of railroad com85 inissioners bad no power to attempt to force the surety company to make a settlement with its creditors, nor to assume to itself the power of adjudicating what the amounts of those settlements should be. We believe, however, that the commissioners had the right, if they thought the bonds furnished by the elevators were insufficient for any reason, whether on account of the financial responsibility of the bondsmen or their lack of business reliability, to require new ones. We also believe that under § 2247, Rev. Codes 1905, which requires operators of grain elevators to file with the board of railroad commissioners a bond running to the state, with good and sufficient sureties, to be approved by .the commissioners and conditioned for the faithful performance of their duties as public warehousemen, and under § 2242, Rev. Codes 1905, as amended by chapter 230, Laws of 1909, and which, among other things, gives to the board of railroad commissioners the power “to investigate all complaints of fraud or oppression in the grain trade of this state and correct the same,” such board could examine into the sufficiency of the bonds, both as to form and general business conduct and reliability of the sureties, and for such purpose might summon any witnesses before them, and make any reasonable investigations that they pleased. Whether they could, in such a case, by court procedure or otherwise, compel the attendance of such witnesses and require testimony under oath, is a matter not here determined. A surety or bonding company can, at any rate, hardly complain because, when complaints are made of its business dealings, and objection made to its further retention as a bondsman, it is given an opportunity to appear and to be heard. It may be, in a clear case of fraud or collusion, that the bonding company would, in a proper proceeding, have some measure of relief, and that the courts would be willing to protect its rights under the contracts already entered into. A clear distinction, however, must be. made betweeq the bonding company and the elevator companies. The bonds were required by the statute to be furnished by the elevator owners, and not by the bonding company. The bonding company was a. surety only. The elevator companies were required to furnish the' bonds, and it was for them to make their own contracts. The board! of railroad commissioners has, under the statute (§§ 2241 and 2247,, Rev. Codes 1905) the power to require good and sufficient bonds, and — 86 — to pass upon the sufficiency of the bonds furnished to them by the elevator companies, no matter hy what sureties signed, and, as a necessary incident to such power, to demand new and additional bonds if they become dissatisfied with those already given. We believe that they have these powers not only under the clause of the statute which imposes upon them the duty of approving the bonds, but also under the clause which gives them the power to prevent fraud in the grain trade. We certainly believe that under the latter clause they have the power to investigate all such matters. They may not, it is true, be able to compel the bonding companies to appear before them, but they have the right to make the inquiries. The dealings of the board are with, and their jurisdiction is over, the elevator companies, .rather than over the bonding company. No one, we believe, would contend that a surety on an appeal bond or bail bond would have reason or right to object if a clerk of a court or a judge were to refuse to accept a bond on which he was a surety. The controversy would be between the appellant or offerer of the bond and the clerk, and not between the clerk and the surety. We believe that the board had no power to compel the appearance of the bondsman before it for the purpose of forcing a settlement with its creditors before a legal adjudication of its liability. It certainly had no power to threaten to cancel the bonds if it did not appear or settle with the ticket holders, on the basis that it, the commission, thought just. It had the power, however, to make reasonable injuries to satisfy itself as to the sufficiency of the bonds furnished by the company, and fair play would require the giving of an opportunity to the trust company to explain its past dealings. The power of the commission extended at the most to insisting that the elevator companies should furnish new and additional bonds, and if such companies should refuse so to do, to revoke their licenses. We believe they had the power to investigate into the business methods as well as the financial responsibility of the surety, and that their reason for seeking to cancel the bonds which is given in the answer is a reason that the courts cannot declare to be without merit. Of course, if the petition is true, another aspect is put upon the case; but we must remember that it is the answer or return that we are considering, and that all of the allegations of the answer are admitted by the demurrer. The answer, in short, charges the surety company not only with bad faith, but with — 87 — seeking to compound numerous felonies. We can bardly say that sucb charges, if sustained, against the surety, would not justify the requirement of new bonds. We do not say that the surety company is guilty of the felonies charged. We merely say that the answer so charges, and that the truth of the answer is admitted by the demurrer. We resolve the main and real question in controversy in favor of the appellants, and hold that the board of railroad commissioners has the power and authority to examine into the sufficiency of bonds issued by the elevator companies, as to form, as to amount, and as to the general reliability and business methods and previous good faith of the bondsmen. In the exercise of their legitimate discretion in these matters, they cannot be controlled by mandamus, prohibition, or any other proceeding; nor can they be compelled to accept and approve as sureties persons or corporations of whom they disapprove. For good faith in such matters they are responsible to the public, and not to the sureties. Such being our conclusion, it follows that the judgment of the district court should be modified. That judgment was as follows: “Is is hereby adjudged and determined that the defendants, commissioners of railroads of the state of North Dakota and the board of railroad commissioners of the state of North Dakota, be,, and they are, perpetually and peremptorily prohibited and enjoined from in any manner attempting to execute or enforce the orders or resolutions, or any part thereof, made and adopted by said defendant board of railroad commissioners on the 10th day of June, 1911, set forth in the petition and alternative writ herein as Exhibit D, the same being in substance and to the effect that the relator herein show cause before said defendant board why its bonds or insurance contracts of and for certain public warehousemen should' not be canceled in the event of the failure of said relator to comply with the orders and resolutions of said board theretofore made with respect to certain payments, settlements, and obligations of said relator as surety on the public warehouseman bond of one Samuel Kittler; and said orders and resolutions were and are without the jurisdiction of said defendant board, and null and void; and that a peremptory writ of prohibition shall be issued by this court as prayed for in the petition herein.” The resolutions of the board spoken of as Exhibit D in such judgment contain two — 88 — parts. The first was an order and resolution directing that the Dakota Trust Company appear before said hoard and show cause why the commission should not cancel the bonds of said trust company because of its failure to effect a settlement satisfactory to the commission with the holders of the warehouse receipts issued by said Samuel Kittler. This part of Exhibit D was beyond the power of the commission. In other words, the commission had no power to direct, or by threats or otherwise to force, a settlement between the trust company and the creditors of Samuel Kittler. The commission, on the other hand, had a perfect right, if they saw fit, and on account of their dissatisfaction with the business methods of the surety, to require the elevators to furnish new bonds, and the trial court should not have enjoined the board from carrying out that part of the order or resolution which was as follows: “Be it further resolved that the secretary notify and require each of the above-named elevator companies and warehousemen to secure and have ready on said date of June 2Jth new bonds or undertakings, satisfactory to this commission, to take the place of the said Dakota Trust Company’s bonds, in the event they are then ordered canceled by this commission.” The words, “ordered canceled,” are, perhaps, unfortunate; and the words used should have been “in the event that new bonds are required by this commission.” The substance of the resolution, however, was beyond criticism, and its real meaning is quite evident. The cause, therefore, will be remanded to the district court with directions to enter an order prohibiting the board of railroad commissioners from ordering the Dakota Trust Company to appear before it, and show cause why the commission should not cancel the bonds of said trust company because of its failure to effect a settlement satisfactory to the commission with the holders of the warehouse receipts issued by said Samuel Kittler. Such order or judgment, however, is to contain no other provision or prohibition. Ko costs or disbursements will be allowed to either party. BuRke, J., concurs.