Caminetti v. Pac. Mut. Life Ins. Co. of Cal. ( 1943 )

GIBSON, C. J.

In 1936, the business and assets of the Pacific Mutual Life Insurance Company of California (hereafter called the “old company”) were taken over by the Insurance Commissioner of this state pursuant to statutory authority. (Ins. Code, §§ 1011 and 1013.) Thereafter, respondent Pacific Mutual Life Insurance Company (hereafter called the “new company”) was organized as part of a plan of rehabilitation of the old company by the commissioner who purchased its entire capital stock with assets of the old company. Pursuant to section 1043 of the Insurance Code, a “Rehabilitation and Reinsurance” agreement was entered into between the new company and Samuel L. Carpenter, Jr., the then Insurance Commissioner, as conservator of the old company. The agreement contemplated a transfer to the new company of the assets of the old company (except certain claims against officers and directors of the old company) and the assumption by the former of the obligations of the latter, excluding what is known as “non-can” policies. The new company also assumed a limited obligation with respect to the non-can policies and agreed to set up a special fund for the restoration of benefits thereunder. The capital stock of the new company was to be held by the commissioner as conservator or liquidator for the benefit of the creditors, policyholders, and stockholders of the old company. On December 4, 1936, the agreement received court approval. The legality of the original seizure and the lawfulness of the plan of rehabilitation were upheld on appeal. (Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307 [74 P.2d 761], affirmed in Neblett v. Carpenter, 305 U.S. 297 [59 S.Ct. 170, 83 L.Ed. 182].) On February 2, 1937, an order was made providing for the liquidation of the old company and appointing the Insurance Commissioner as liquidator. The legality of this order was likewise upheld on appeal. (Carpenter v. Pacific Mutual Life Ins. Co., 13 Cal.2d 306 [89, P.2d 637].) The factual background of this prolonged litigation is set forth in the prior decisions and will be repeated here only insofar as is necessary to an understanding of the problems raised on the present appeals. (Cf. Carpenter v. Pacific Mutual Life Ins. Co., 14 Cal.2d 704 [96 P.2d 796].)

On April 4, 1938, the stock of the new company was transferred by the then commissioner by a voting trust agreement to five persons named as voting trustees. Commissioner Caminetti succeeded to the office in June, 1939, and in June,. 1940, sought an order directing respondents to show cause why the voting trustees should not be directed to retransfer the stock to him upon the ground that the voting trust was invalid. Prior thereto, and in December, 1939, a motion had been noticed upon similar grounds by William H. Neblett and others. On May 8, 1940, the superior court denied both applications. Appeals were taken from these orders of denial and are presented upon a single bill of exceptions. Certain contentions are made which are common to all appellants. Other contentions are made by Neblett et al., in which the commissioner does not join. For purposes of clarity they will be grouped under separate headings.

A. Contentions common to all appellants.

Appellants advance three main contentions in support of their claim that the voting trust is invalid. It is urged (1) that section 1037 (e) of the Insurance Code, relied upon by respondents as authority for the creation of the voting trust, is inapplicable to the stock of the new company; (2) that the section is unconstitutional if construed to authorize the voting trust; and (3) that court approval, not obtained in the present case, is required under the code for the creation of a voting trust.

(1) Applicability of section 1037 (e).

Section 1037 (e), enacted in 1937, provides: “Upon taking possession of the property and business of any person in any proceeding under this article, the commissioner, exclusively and except as otherwise expressly provided by this article, either as conservator or liquidator: . . . (e) Shall have authority to transfer to a trustee or trustees, under a voting trust agreement, the stock of an insurer heretofore or hereafter issued to him as conservator or as liquidator in connection with a rehabilitation or reinsurance agreement, or any other proceeding under this article. Such voting trust agreement shall confer upon the trustee or trustees the right to vote or otherwise represent such stock, and shall not be irrevocable for a period of more than twenty-one (21) years.” Appellants contend that this section must be construed to operate prospectively to the exclusion of the stock of the new company which had been issued prior to its enactment, and further that the section was not intended to apply to stock of an insurer organized, as was the new company, as a medium through which rehabilitation of the business of á delinquent insurance company was to be accomplished.

The rule that statutes are ordinarily construed to operate prospectively is based upon the presumed intent of the Legislature. (Jones v. Union Oil Co., 218 Cal. 775 [25 P.2d 5]; Krause v. Rarity, 210 Cal. 644 [293 P. 62, 77 A.L.R. 1327]; Anderson v. Ott, 127 Cal.App. 122 [15 P.2d 526]; Addiss v. Selig, 264 N.Y. 274 [190 N.E. 490, 92 A.L.R. 1384].) It has no application where the Legislature manifests a contrary intent. (McCann v. Jordan, 218 Cal. 577 [24 P.2d 457]; Krause v. Rarity, supra; Addiss v. Selig, supra; In re Bond & Mortgage Guarantee Co., 157 Misc. 240 [283 N.Y.S. 623].) Section 1037 (e) expressly includes “stock of an insurer heretofore or hereafter issued” to the commissioner. Its language is unambiguous and clearly indicates the Legislature intended a retrospective operation. (Cf. Addiss v. Selig, supra; Westervelt v. Gregg, 12 N.Y. 202 [62 Am.Dec. 160].)

To adopt the contention that section 1037 (e) was not intended to apply to stock of an insurance company organized as a medium through which rehabilitation of the business of a delinqúent insurer was to be accomplished would require us to disregard the clear language of the statute. Section 1037 (e) specifically refers to stock issued to the commissioner “as conservator or as liquidator in connection with a rehabilitation or reinsurance agreement.” The intent of the Legislature must be ascertained from the language of the enactment and where, as here, the language is clear, there can be no room for interpretation. (First Congregational Church v. County of Los Angeles, 9 Cal.2d 591, 594 [71 P.2d 1106]; Riley v. Robbins, 1 Cal.2d 285, 287 [34 P.2d 715]; People v. Stanley, 193 Cal. 428, 431 [225 P. 1].)

In view of our conclusion that the statute applies here, no prejudice could have resulted from the rejection of evidence offered by the commissioner to show that at the time of its enactment he held stock of other insurers to which the statute assertedly was intended to apply.

Section 1037 (e) authorizes a voting trust with respect to stock issued to the commissioner as “conservator or as liquidator.” It has been suggested that the stock of the new company was issued to the commissioner not as “conservator or liquidator” but as a special contractual trustee. There is nothing in the rehabilitation agreement or court orders to indicate that this stock was issued to the commissioner in any capacity other than that of conservator or liquidator as contemplated by the section. The rehabilitation agreement refers only to stock held by the commissioner as “conservator or liquidator”, and paragraph 25 provides that he is bound by the provisions of the agreement “only in his capacity as . . . Conservator or Liquidator of the Old Company.” The court order of December 4, 1936, approving the agreement provides that the commissioner “as conservator . . . or . . . liquidator” is authorized to carry out its covenants. On appeal from that order, this court stated: “The Plan provides that the Commissioner, either as Conservator or Liquidator, shall continue to hold all of the stock of the New Company....” (Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307 [74 P.2d 761] at p. 322.) Finally, the order for liquidation of February 2, 1937, provides: “That title to all property and assets of respondent corporation . . . together with all right, title, and interest of said Commissioner as Conservator in said stock of [the new company] shall remain and be vested in said Commissioner ... as liquidator of [the old company].” (Italics added.) It necessarily follows that the commissioner held the stock of the new company in his capacity as conservator or liquidator and not as a special contractual trustee. It has been held that the commissioner acts “as an officer of the state in the public interest” regardless of the fact that his “duties ... as conservator are in the nature of those of a receiver or trustee.’ ’ (Anderson v. Great Republic Life Ins. Co., 41 Cal.App.2d 181, 188 [106 P.2d 75]. See, also, Insurance Code, §§ 1057, 1059; Mitchell v. Taylor, 3 Cal.2d 217 [43 P.2d 803]; Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307, 330, 335, 338, 340 [74 P.2d 761]; Garris v. Carpenter, 33 Cal.App.2d 649, 654-656 [92 P.2d 688]; cf. Evans v. Superior Court, 14 Cal.2d 563 [96 P.2d 107].)

(2) Constitutionality of section 1037 (e).

It is next contended that section 1037 (e) as here construed is unconstitutional as a legislative impairment of contract obligations, as a taking of property without due process, as a legislative encroachment upon the powers of the judiciary, and as an unlawful delegation of legislative power. This follows, it is argued, because the voting trust assertedly violates the terms of the rehabilitation agreement and the orders of the superior court approving the same and providing for the liquidation of the old company. The contention that contract and property rights are impaired requires a consideration of the terms of the rehabilitation agreement and court orders, the rights thereunder, and the effect of the voting trust agreement thereon.

The rehabilitation agreement provides that the stock of the new company, which already had been organized as the corporate agent of the commissioner, shall continue to be held by the commissioner as conservator. (Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307, 321-325 [74 P.2d 761].) The assets of the old company were to be transferred to the new company and, in return, the new company was to assume the obligations of the old company except with respect to the non-can policies. The new company also assumed a limited obligation with respect to such non-can policies and agreed to set up a special fund for the restoration of full benefits under those policies. Paragraph 20 of the agreement, entitled “Mutualization and Disposition of Stock of New Company,” relates to the ultimate status and ownership of the new company. It provides that neither the conservator nor liquidator shall “dispose of” the stock of the new company except as follows:

Subdivision (a) authorizes the commissioner to dispose of the stock in accordance with any plan of mutualization thereafter adopted by the policyholders of the new company, and such a disposition may include a transfer to voting trustees if the plan of mutualization so provides. Subdivision (b) authorizes merger, consolidation, reorganization or reinsurance. Subdivision (e) gives the old company the option to pay the full amount needed to restore benefits under the non-can policies and authorizes the commissioner in that event to distribute the stock upon court order. Subdivision (d) author-izes the commissioner to sell the stock upon court order if, at any time, he determines that such a sale is required for the protection of the estate in liquidation. Subdivision (e) states that “It is the purpose, spirit, and intent of this agreement that, unless the provisions for mutualization are eliminated pursuant to the provisions of subparagraph (b) of this paragraph 20, the stock of the New Company shall not be sold or disposed of prior to the full restoration of benefits under Non-Can Policies except by proceedings for mutualization, so long as a reasonable probability of completing restoration of benefits under Non-Can Policies shall continue. ...” Subdivision (f) contains the usual severability clause.

The affairs of the new company are placed in charge of a board of directors to whom the agreement expressly confides a large measure of discretion. Supervisory powers, however, are reserved to the commissioner, independent of and in addition to his statutory powers over delinquent insurance companies. For example, no investment or reinvestment of the assets of the old company may be made without written approval of the commissioner. Payments to the restoration fund for non-can policies are subject to the approval of the commissioner who, in addition, may require further payments thereto. The determination by the board of directors of the apportionment of expenses and the exchange of assets among the several departments of the new company is subject to adjustment by the commissioner. Reserves against policies of the old company subject to assumption or reinsurance under the agreement were to be established by the new company with the approval of and in accordance with the requirements of the commissioner. While as holder of the stock the commissioner possessed the voting rights incident thereto, the agreement contains no express provision with respect to the exercise of the voting power.

The voting trust, on the other hand, is a contract between the commissioner as conservator or liquidator and named trustees. It recites that “it is one of the primary purposes of this agreement to assure the full accomplishment of all of the intents and purposes of the Rehabilitation Agreement in accordance with its terms. The parties hereto therefore declare that no provision of this agreement is to be construed in any manner which would result in a violation of any of the terms, agreements, or provisions o£ said Rehabilitation Agreement; and if any covenant or agreement provided herein .. . should be contrary to any express provision of said Rehabilitation Agreement, or contrary to the policy of said Rehabilitation Agreement . . . then such covenant or covenants, agreement or agreements, shall be null and void, and shall be deemed separable from the remaining portions hereof. . . . ” [Italics added.]

The trustees are given legal title to the stock of the new company with the power to exercise all the rights of ownership. The commissioner, however, retains the entire beneficial interest for the benefit of creditors of the old company and others interested. The voting trust undertakes to transfer to the trustees only administrative duties relating to the stock, principally the right to vote the same. The trust is made irrevocable for a period of slightly less than twenty-one years, except that it may be terminated sooner in accordance with the provisions of paragraph 20 of the rehabilitation agreement. Moreover, it must be conceded that the Legislature may terminate the trust at an earlier date.

The two agreements are not inconsistent, as contended by appellants, but on the contrary the voting trust agreement, as declared therein, is intended to and does supplement and facilitate the carrying out of the provisions of the rehabilitation agreement. The intent of the parties is apparent from that portion of the voting trust agreement, quoted above, which declares that if any of its covenants are contrary to the rehabilitation agreement such covenants “shall be null and void.”

Appellants contend that the restriction against disposal in paragraph 20 of the rehabilitation agreement precludes the creation of a voting trust. This provision, they argue, gave the policyholders a right to have the commissioner administer the new company, by means of the power to vote its stock. Neither the language nor the purpose of the restriction supports the interpretation. Paragraph 20 relates only to the ultimate status and ownership of the new company, including possible mutualization and full restoration of benefits to non-can policies. It does not pertain to the administration of the new company or the supervisory powers of the commissioner which are fully set forth in other paragraphs. As indicated in subdivision (e) of paragraph 20, the purpose of the restriction is to prevent such a sale or disposition of the stock as would permit the transferees to cut off prematurely the rights of the policyholders either to mutualization or to full restoration of benefits under the non-can policies. The words “dispose of,” as used in the paragraph, are directed at any complete alienation of the stock, but do not prohibit transfer of the management of the company by means of transfer of the voting rights of the stock pending rehabilitation. The quoted phrase is used in this sense elsewhere in the agreement (paragraphs 1, 19 (e), 20 (a)). Words used in a certain sense in one part of an instrument are deemed to have been used in the same sense in another. (Pringle v. Wilson, 156 Cal. 313, 319 [104 P. 316, 24 L.R.A. N.S. 1090]; 6 Cal.Jur. 286.) It is true that the words “dispose of” are used in subdivision (a) of paragraph 20 in connection with an authorization to the commissioner to transfer the stock of the new company to voting trustees in accordance with a plan of mutualization. But it is clear that under that subdivision the transfer there provided for would require a complete alienation of the stock in order to carry out the plan of mutualization contemplated therein.

•The voting trust agreement is not a disposal of the stock within the meaning or purpose of paragraph 20 of the rehabilitation agreement. Although the trust agreement transfers to the trustees the legal title to the stock, it expressly reserves to the commissioner “the entire beneficial interest in such stock. ’ ’ The commissioner therefore retains for the benefit of the stockholders and creditors of the old company the same substantial interest he theretofore possessed as statutory trustee. As said in Smith v. Bramwell, 146 Ore. 611 [31 P.2d 647, 648-649] : “Notwithstanding plaintiff had transferred the legal title to his stock to the trustees, he was still the beneficial owner of the same. The trustees had no interest in the stock other than to vote it in keeping with the purpose of the trust agreement. . •. . Ee still to all intents and purposes, is a stockholder except that he has no personal right to vote his stock.” To the same effect, see Application of Bacon, 287 N.Y. 1. [38 N.E.2d 105, 107]; In re Morse, 247 N.Y. 290 [160 N.E. 374, 379]; State Tax Commr. v. Commrs. of Baltimore Co., 138 Md. 668 [114 A. 717, 721], The reservation of the beneficial ownership of the stock, coupled with the fact that the voting trust may be terminated in accordance with paragraph 20 of the rehabilitation agreement and the further fact that the commissioner retained the supervisory powers given elsewhere in the rehabilitation agreement, is a complete answer to the contention that the commissioner by creating the voting trust had transferred “all that he had.”

Nor do we find any inconsistency between the voting trust and the court orders. The order of December 4, 1936, does no more than approve the rehabilitation agreement and the prior actions of the commissioner and provide for its enforcement. If the voting trust is consistent with the rehabilitation agreement, it is equally consistent with the court order. The voting trust does not interfere with the jurisdiction retained by the court over the commissioner. And, as stated in the order, the commissioner was authorized to do whatever was deemed reasonably necessary to effectuate the agreement “either with or without further order of this court.” The order for liquidation of February 2, 1937, provides “that title to all property and assets of respondent corporation [the old company] now vested in said Commissioner as said conservator, together with all right, title and interest of said Commissioner as said conservator in said stock of Pacific Mutual Life Insurance Company [the new company], shall remain and be vested in said Commissioner, and his successor in office, as liquidator. ...” This provision was “obviously . . . inserted in the liquidation order . . . in order to provide that the alteration in the commissioner’s duties in carrying on the business of the old company as conservator, to winding it up as liquidator, should not divest nor disturb his titles.” (Carpenter v. Pacific Mutual Life Ins. Co., 13 Cal.2d 306, 312 [89 P.2d 637].) It does not purport to prohibit future changes in the commissioner’s title.

The commissioner prior to the creation of the voting trust exercised the voting rights incident to stock ownership. It is contended, in effect, that continued exercise of this power by the commissioner is necessary to safeguard the interests of the creditors and is a substantive right acquired under the court order approving the rehabilitation agreement. The power conferred upon the commissioner to create a voting trust does not authorize him to alter or modify the substantive rights of the parties as set forth in any plan of rehabilitation and no such attempt was made in this case. Bather, it permits a transfer of the administrative duty of voting the stock from one state instrumentality to another. There is no constitutional right to a particular form of remedy or to the enforcement of such remedy by a particular state official. (Neblett v. Carpenter, 305 U.S. 297, 305 [59 S.Ct. 170, 83 L.Ed. 182]; Gibbes v. Zimmerman, 290 U.S. 326 [54 S.Ct. 140, 78 L.Ed. 342]; cf. In re Westchester T. & T. Co., 268 N.Y. 432 [198 N.E. 19].) Neither the rehabilitation agreement nor the court orders undertake to restrict the power of the Legislature to transfer the duties of the commissioner to another state instrumentality, and it may well be that any attempt to do so would be improper.

The board of voting trustees created under section 1037 (e) may, in our opinion, properly serve as a state agency or instrumentality, although its members are private persons. Similar devices are familiar to the law. For example, the directors of a corporation in the course of dissolution were at one time, by statute, made trustees to wind up its affairs— their powers were derived from the statute alone and court appointment was unnecessary. (Rossi v. Caire, 174 Cal. 74, 80-81 [161 P. 1161]; Clark v. Millsap, 197 Cal. 765 [242 P. 918]; 6A Cal.Jur. 1490-1493.) A privately owned corporation, together with a voting trust, was held a proper instrumentality of the United States for administration of German chemical patents. (United States v. Chemical Foundation, 272 U.S. 1, 18-19 [47 S.Ct. 1, 71 L.Ed. 131].) National banks are federal instrumentalities though they are privately owned and controlled. (Davis v. Elmira Savings Bank, 161 U.S. 275, 283 [16 S.Ct. 502, 40 L.Ed. 700]; First Nat. Bk. v. California, 262 U.S. 366, 368 [43 S.Ct. 602, 67 L.Ed. 1030]; cf. McCulloch v. Maryland (U.S. 1819), 4 Wheat. 316 [4 L.Ed. 579]; 12 U.S.C.A., §§ 24, 51 et seq., 71.) The members of the Board of Regents of the University of California are not public officers. (Lundy v. Delmas, 104 Cal. 655, 658-660 [38 P. 445, 26 L.R.A. 651].) A new bank has been substituted for the state superintendent of banking in the rehabilitation of an insolvent bank. (Doty v. Love, 295 U.S. 64 [55 S.Ct. 558, 79 L.Ed. 1303, 96 A.L.R. 1438].) And in this proceeding a new corporation was created as the corporate agent of the commissioner in rehabilitating the old company. (Carpenter V. Mutual Life Ins. Co., 10 Cal.2d 307, 321-322, 324-325 [74 P.2d 761]; Neblett v. Carpenter, 305 U.S. 297, 302 [59 S.Ct. 170, 83 L.Ed. 182].)

Even if we were to assume, however, that exercise of the voting power of the stock by the commissioner is a contractual obligation under the rehabilitation agreement and court orders, it would not follow that section 1037 (e) authorizing exercise of that power by voting trustees violates the constitutional inhibitions against the impairment of contracts or the taking of property without due process of law. It is settled that contract and property rights must yield to legislation in the interest of the general welfare. (Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307, 331 [74 P.2d 761]; Agricultural Prorate Commission v. Superior Court, 5 Cal.2d 550, 554 [55 P.2d 495]; Veix v. Sixth Ward etc. Assn., 310 U.S. 32, 40 [60 S.Ct. 792, 84 L.Ed. 1061]; Union Dry Goods Co. v. Georgia P. S. Corp., 248 U.S. 372, 375-377 39 S.Ct. 117, 63 L.Ed. 309].) That the power of the commissioner with respect to statutory proceedings against insolvent or delinquent insurers is of general public concern is not open to question. (See Carpenter v. Pacific Mutual Life Ins. Co., 10 Cal.2d 307 [74 P.2d 761]; Mitchell v. Taylor, supra.) It is for the Legislature to determine what the interests of the public require and what measures are necessary for their protection. (Ex parte Quong Wo, 161 Cal. 220, 230 [118 P. 714]; State Sav. & Comm. Bank v. Anderson, 165 Cal. 437, 443-445 [132 P. 755, L.R.A. 1915E, 65] affirmed in 238 U.S. 611 [35 S.Ct. 792, 59 L.Ed. 1488]; Miller v. Board of Public Works, 195 Cal. 477 [234 P. 371, 38 A.L.R. 1479]; Nebbia v. New York, 291 U.S. 502, 537-538 [54 S.Ct. 505, 78 L.Ed. 940]; Erie Railroad Co. v. Williams, 233 U.S. 685, 699 [34 S.Ct. 761, 58 L.Ed. 1155].) By its enactment of section 1037 (e) the Legislature has determined that the public interest is served by permitting the commissioner to utilize the voting trust technique of corporate control even as to stock theretofore issued to him. Its determination finds support in the following considerations: As statutory receiver of delinquent insurers stock of many insurers is issued to the commissioner with the result that the duty of exercising the voting power thereof would seriously encroach upon his time to the detriment of other statutory duties. The use of a voting trust also serves to obviate conflicting interests which might arise from the commissioner’s exercise of the voting power incident to possession of the stock of an insurer and his exercise of regulatory power over insurance companies in general. It also makes possible continuity in management and uniformity in policy. The fact that the voting trust form of management is not mandatory but discretionary with the commissioner is not a valid argument against the propriety of the legislation. That other means were available to attain a legitímate objective does not render the statute unconstitutional. The authorization contained in section 1037 (e) constitutes a reasonable means of effecting the foregoing objectives.

The decision of the New York trial court in In re Bond & Mortgage Guarantee Co., 157 Misc. 240 [283 N.Y.S. 623], cited by appellants, is not authority for the contention that section 1037 (e) is not a proper exercise of the police power. The ease is factually distinguishable. There the Bond & Mortgage Guarantee Company [the old company] had guaranteed mortgage certificates issued by the Title Guarantee & Trust Company and the Bond Company also had a contract to service the mortgages. The Bond Company subsequently was rehabilitated under the Schaekno Act (similar to Calif. Ins. Code, § 1043). The superintendent of insurance organized the Bond & Mortgage Corporation [the new company] and received its capital stock as rehabilitator of the old company. Pursuant to the court order a servicing contract was entered into between the new company and the Title Company. Subsequently the Legislature enacted the Mortgage Commission Act which purported to authorize the Mortgage Commission to take over from the superintendent certain assets of companies under rehabilitation, including servicing contracts. Holders of mortgage certificates sought to enjoin the Mortgage Commission from taking over the mortgages and the servicing contracts. The court held that the Legislature had no power to take from the new company assets that had been given to it pursuant to contract and approved by the court. Without considering the propriety of the holding in that case, we find it inapplicable here. It would be in point only if the Legislature in the present case had purported to take from the new company assets given to it under the rehabilitation plan.

It is urged that while a private contract fixing private rights is subject to a proper exercise of the police power, a different rule obtains where, as here, the contract was imposed upon the parties in the first instance by the state acting in the interests of the general welfare. We know of no authority holding that in such a situation the state may not thereafter legislate on the same subject. On the contrary, the state cannot abdicate or bargain away its police power even by express grant (Atlantic Coast Line R. R. Co. v. Goldsboro, 232 U.S. 548, 558 [34 S.Ct. 364, 58 L.Ed. 721]), and rights under a so-called "public” contract are subject to further exercise of the power to which they owe their existence.

The contention is made that section 1037 (e) as here construed results in legislative encroachment upon the powers of the judiciary. This conclusion is based upon the premise that the Legislature’s authorization of a voting trust sanctions a modification of the orders approving the rehabilitation agreement and providing for liquidation, in which orders the court directed that title to the stock should remain and be vested in the commissioner. As shown above, the voting trust agreement is not inconsistent with those orders. Assuming an inconsistency, however, no encroachment upon judicial power resulted. Ordinarily the judgment of a court may not be modified or altered by legislative action (Lincoln v. Alexander, 52 Cal. 482 [28 Am.Rep. 639]; State v. Wildes, 34 Nev. 94 [116 P. 595]; Gilman v. Tucker, 128 N.Y. 190 [28 N.E. 1040, 26 Am.St.Rep. 464, 13 L.R.A. 304]) because a judgment is a form of contract protected by the contract and due process clauses of the state and federal Constitutions. (Hodges v. Snyder, 261 U.S. 600 [43 S.Ct. 435, 67 L.Ed. 819]; Mooney v. Drainage Dist. No. 1, 134 Neb. 192 [278 N.W. 368]; In re Bond & Mortgage Guarantee Corp., 157 Misc. 240 [283 N.Y.S. 623].) A further reason has been advanced to the effect that such legislation is an infringement upon the functions of the judicial branch of the government. (See Lincoln v. Alexander, supra; Mooney v. Drainage Dist. No. 1, supra.) Thus, in State v. Wildes, supra, where the Nevada court had assumed jurisdiction in equity to appoint a receiver and conduct the liquidation of a bank, it was held that the Legislature could not by statute transfer that liquidation proceeding into the hands of the state bank examiner. The decision, however, is not controlling here. This proceeding is wholly statutory. The duties imposed upon the commissioner, and the supervision over him vested in the courts, result from the statute. Responsibility for devising procedures of rehabilitation or liquidation rests with the Legislature and the fact that a particular procedure has been approved with respect to a specific plan of rehabilitation does not foreclose further legislative action with respect to procedural matters. In the case of In re Westchester Title & Trust Co., 268 N.Y. 432 [198 N.E. 19], the court denied that infringement of judicial power resulted where the Legislature passed a statute transferring the functions of a court-appointed financing agent to a Mortgage Commission following the insolvency of the former. The court there said (p. 441) ; “The Legislature could provide a new method for the administration of these mortgage investments for the benefit of those interested in such investments without invasion of the equity powers of the Supreme Court over trusts." (Cf. Estate of Barreiro, 125 Cal.App. 153 [13 P.2d 1017].) Nor is the present situation altered because the superior court in its order of December 4 specifically retained jurisdiction over the proceeding. Jurisdiction was not expressly retained for the purpose of controlling or supervising the voting of the stock. The court had jurisdiction to correct any fraud or abuse in the exercise of the voting power by the commissioner. It possesses the same jurisdiction over the voting trustees (1 Restatement of the Law of Trusts, § 187) and the statute has not therefore curtailed the judicial function.

It is also asserted that as here construed section 1037 (e) constitutes an invalid delegation of legislative power because there are no standards by which the commissioner is to be guided in determining when to set up voting trusts. The commissioner is given wide discretion and broad powers in the use of voting trusts in rehabilitation proceedings. The guide for the exercise of those powers appears in the concluding provision of section 1037 which authorizes him to do that “which he may deem necessary or expedient for the accomplishment or in aid of the purpose of such proceedings. ’ ’ This is the standard considered controlling by the Legislature and is sufficient under the decisions as against this challenge to the statute’s constitutionality. (Cf. Gaylord v. City of Pasadena, 175 Cal. 433, 439 [166 P. 348]; People v. Globe Grain & Mill. Co., 211 Cal. 121, 124 [294 P. 3]; Jersey Maid Milk Products Co. v. Brock, 13 Cal.2d 620, 642 [91 P.2d 577].) As said in United States v. Chemical Foundation, 272 U.S. 1, 12 [47 S.Ct. 1,71 L.Ed. 131], “It was not necessary for [the Legislature] to ascertain the facts of or to deal with each ease. The Act went as far as was reasonably practicable under the circumstances existing." It is peculiarly within the province of the commissioner to know the facts and to determine when a voting trust is expedient or necessary to effectively carry out a plan of rehabilitation.

(3) Court approval.

Appellants contend that the voting trust is invalid because court approval thereof was not secured. Section 1037 (e), however, contains no requirement for court approval. The absence of such requirement indicates that none was intended. This is suggested by the opening paragraph of the section which grants authority to “the commissioner, exclusively and except as otherwise expressly provided.” It is also suggested by the fact that subdivision (d) of section 1037 as well as sections 1035, 1036, 1041, and 1043 expressly require court approval of certain acts of the commissioner. By the subsequent enactment of section 1037 (e) without such requirement it must be concluded that the omission was intended. Appellants insist, however, that the creation of a voting trust in this case came within the meaning of sections 1037 (d) and 1043 and therefore required the court approval contemplated by those sections. This contention would compel us to read such requirement into section 1037 (e). Section 1037 (d) authorizes the commissioner to sell, transfer or dispose of real or personal property of any person whose property and business has been taken over provided that, if the transaction involves property the market value of which is over $1,000, permission of court must be obtained. This requirement has no application to the creation of a voting trust under a separate provision of the statute which makes no specific requirement for court approval. A clear distinction exists between a disposal of assets under section 1037 (d) and a transfer of voting power to a board of trustees (another state instrumentality) under section 1037 (e) in which the substantive rights of the parties and the corpus of the trust are not disturbed. Section 1043 authorizes the commissioner to enter into rehabilitation agreements upon court order. Appellants contend that the voting trust was a modification of the rehabilitation agreement and was, in effect, a new and different plan of rehabilitation requiring court approval. As stated above, the voting trust does not alter or modify the provisions of the rehabilitation agreement. Even if it does, however, the modification concerns only administrative duties connected with the stock of the new company and does not alter substantive rights in any way. It follows that the voting trust does not constitute a new rehabilitation agreement for which court approval is required under section 1043.

B. Contentions of Neblett, et al.

We now turn to a consideration of the contentions of Neblett and others in which the commissioner does not join.

The Neblett motion urged that the voting trust was invalid because it constituted a contract in which Commissioner Carpenter was interested personally through ownership of policies of insurance in the old company, later converted into policies in the new company. Political Code, section 920, provides: “Members of the Legislature, state, county, city and township officers, must not be interested in any contract made by them in their official capacity. ...” Contracts made by a public officer in his official capacity may be avoided at the instance of any party except the interested officer where the officer has any direct or indirect interest therein. (Political Code § 922; Moody v. Shuffleton, 203 Cal. 100 [262 P. 1095]; Berka v. Woodward, 125 Cal. 119 [57 P. 777, 73 Am. St. Rep. 31, 45 L.R.A. 420].) The sole question in the pres-sent case is whether section 920 precluded the commissioner from making contracts relating to Pacific Mutual, for it must be conceded that persons may hold the office of commissioner although they own policies in companies subject to the act. (Prior to 1941 section 12901 of the Insurance Code provided “An officer, agent, or employee of an insurer is not eligible to the office of commissioner,” but it did not render anyone ineligible because of ownership of policies, and in 1941 the section was clarified to specifically permit such ownership.) The Legislature has directed that certain provisions of the Insurance Code, including the sections authorizing voting trusts and rehabilitation agreements, are to be carried into effect by the commissioner. If the commissioner were disqualified to act with respect to delinquent insurers in which he holds policies, such insurers and their creditors and policyholders would be deprived of many benefits of the code. No other officer is authorized to perform the commissioner's duties, and if he cannot act, his agents or deputies would likewise be disqualified. In such a situation it must be assumed that the Legislature intended that the commissioner act regardless of the possibility that he might hold policies in the delinquent company. As said in 42 American Jurisprudence 312 “There is an exception, based upon necessity, to the rule of disqualification of an administrative officer. An officer, otherwise disqualified, may still act, if his failure to act would necessarily result in a failure of justice.” The rule of necessity has been applied in this state to members of municipal bodies charged with hearing protests in connection with street assessments. (Federal Construction Co. v. Curd, 179 Cal. 489 [177 P. 469, 2 A.L.R. 1202]; cf. Nider v. Homan, 32 Cal.App.2d 11, 17 [89 P.2d 136].) The rule is not confined to officers exercising quasi-judicial functions. (Marion Township of Boone County v. Howard, 196 Ind. 167 [147 N.E. 619]; c,f. Capital Gas Co. v. Young, 109 Cal. 140 [41 P. 869, 29 L.R.A. 463].)

Appellant Neblett contends also that the commissioner’s personal interest in the voting trust is established by-provisions therein granting him fees and expenses not authorized by law. The allowances to the commissioner are expressly limited to his expenses, and this cannot be held to give him a personal interest in the trust.

It is also argued that the 1937 amendments to sections 1016 and 1037 had the effect of repealing the authority of the commissioner to hold title to the property of the old company as liquidator and of terminating the entire rehabilitation proceeding. After the amendments, section 1016 contained the following language: “Upon a full hearing of such application, the court may make an order directing the winding up and liquidation of the business of such person by the commissioner, as liquidator, for the purpose of carrying out the order to liquidate and wind up the business of such person.” This language furnishes sufficient statutory basis for the exercise of the commissioner’s duties under court order as liquidator of the old company, and does not constitute an implied repeal of the authority previously vested in him.

Neither does the authority to set up voting trusts, conferred upon the commissioner by section 1037 (e), constitute an implied repeal of the provisions of section 1043 authorizing the commissioner to enter into plans of rehabilitation.

Appellants contend that the omission of a requirement for court approval in the former section impliedly repeals the provisions of the latter section because, in effect, it authorizes the commissioner to create new plans of rehabilitation without court approval despite the fact that section 1043 requires court approval' for plans of rehabilitation. Repeals by implication are not favored in the law (Rexstrew v. City of Huntington Park, 20 Cal.2d 630, 634 [128 P.2d 23]; Railroad Commission v. Riley, 192 Cal. 54, 57 [218 P. 415]), and no implied repeal need be found under the facts of this case. Section 1037 (e) does not authorize new plans of rehabilitation without court approval.

Finally, it is contended that the trial court lost jurisdiction to act in this proceeding by reason of its order made on February 5, 1940, continuing the hearing “until the completion of trial” of a concurrently pending action in equity involving the same issues, It is said that the equity action was not completed until after the orders appealed from herein were made. The record shows, however, that appellants permitted the issues raised in this proceeding and in the equity action with respect to the voting trust to be heard together as a matter of convenience. Any error, therefore, in determining this proceeding before completion of the equity case must be deemed waived.

Additional grounds for reversal are suggested, based upon the alleged disqualification of the trial judge who denied the motions here involved and upon the asserted invalidity of the basic rehabilitation agreement. These questions are considered and determined in companion cases decided herewith. (Caminetti v. Pacific Mutual Life Ins. Co., post, p. 386 [139 P.2d 930]; Neblett v. Pacific Mutual Life Ins. Co., post, p. 393 [139 P.2d 934].) The conclusion reached therein that the contentions are unfounded is determinative upon this appeal.

The orders are affirmed.

Shenk, J., Curtis, J., and Spence, J. pro tern., concurred.