First Continental Savings & Loan Ass'n v. Director, State Department of Assessments & Taxation

Hammond, J., delivered the opinion of the Court. The attack in this appeal is on the validity of the ex parte appointment of a receiver for the First Continental Savings and Loan Association, Inc., which was granted on the application of Albert Ward, Director of the State Department of Assessments and Taxation, and of the State of Maryland, under the provisions of Sec. 160L of Ch. 1 of the Laws of the Special Session of 1961. In addition to the contention that there was no justification for such drastic action, which has almost always been made in such cases, sometimes successfully 1 and at other times unavailingly, 2 the Association argues ²⁹⁹ that Ch. 1 was invalid or ineffective under Art. XVI of the Maryland Constitution, and that it was denied due process of law because its motion to dismiss or stay the petition for a receiver and its demurrer challenging the legal sufficiency of the petition were not considered by the lower court before the appointment. Consideration of the background of the passage of Ch. 1 is necessary for proper determination of the argument as to the validity of that law.

A Commission appointed by the Governor to consider regulation of savings and loan associations embodied the recommendations of its report in a bill which was presented at the 1961 session of the General Assembly. After making amendments, the Legislature enacted the bill proposed by the Commission as Ch. 205 of the Laws of 1961. The Act established comprehensive regulation of savings and loan companies and delegated broad policy making powers to a Board of Building, Savings and Loan Association Commissioners. The administration of the Act was confided to a newly created Department of Building, Savings and Loan Associations, the head of which was designated as Director.

The Act dealt with reserve qualifications, dividends, withdrawals, investments, reports and examinations of building and loan organizations, and imposed specific restrictions on the multistock form of doing business, the investing in second mortgages and land instalment contracts and promotion campaigns for deposits. Soon after the passage of the Act, petitions were circulated seeking its referral to the voters at the election in November 1962, under the provisions of Art. XVI of the Constitution of Maryland. Sufficient signatures were procured to effect suspension of the Act until that election. The Governor, feeling that the suspension of Ch. 205 created an emergency, in light of the prevailing urgent need to regulate and correct existing evils and unsound practices in the field, called a special session of the Legislature.

On June 9, 1961, the Senators and Delegates passed, and on June 12, 1961, the Governor approved, a bill identical in substance with Ch. 205 except that administration of the law was vested in the State Department of Assessments and Taxation and its Director; the law was passed by three-fifths of the mem ³⁰⁰ bers of each House and was declared to be an emergency law and to take effect from the date of its passage. Chapter 1 of the Laws of the Special Session of 1961, the emergency act, further declared that it was the intention of the General Assembly to preserve the right of referendum provided by the Constitution “both as to this Act and as to Chapter 205” 3 and its further intention “to meet the emergency that has arisen as a result of the suspension of the-effect of the said Chapter 205 pending referral thereof to the-voters of Maryland”; that therefore Chapter 1 should not be construed as repealing, by implication or otherwise, Chapter 205; and that Chapter 1 “shall terminate at such time as the said Chapter 205 shall become effective.” There was a further provision that “such rules, regulations, orders and decisions as may be made, promulgated or otherwise handed down by the State Department of Assessments and Taxation or its Director pursuant to the authority of this Act” shall remain in full force and effect until changed or repealed “pursuant to the authority of said Chapter 205.” On June 20, 1961, the Attorney General of Maryland ruled that there had been an insufficient number of valid signatures seeking referral of Chapter 205 presented to the Secretary of State to meet the requirements of Art. XVI of the Maryland Constitution for submission of the law for the approval or rejection of the voters. A number of reasons are advanced in support of the contention that Ch. 1 was ineffective. It is argued that because the Attorney.

General had formally advised the Secretary of State that Ch. 205 had not been validly referred, it was not suspended but was in effect and Ch. 1, by its own terms, was ³⁰¹ not. The conclusion urged does not follow. Section 2 of Art. XVI of the Constitution says in precise terms that if the requisite number of signatures seeking a referendum be duly filed with the Secretary of State the law or part of law involved “shall be referred by the Secretary of State to such vote, and shall not become a law or take effect until thirty days after its approval by a majority of the electors voting thereon at the next ensuing election * * *.” Section 1 (b) of Art. XVI states, “The provisions of this Article shall be self-executing * * The period of suspension, which begins at the time specified by Art. XVI (following the filing of the requisite number of sworn-to signatures), ends either when the voters approve the law or when a court holds that suspension has not been effected for want of proper compliance with Art. XVI. Hammond v. Lancaster, 194 Md. 462 ; Sun Cab Co. v. Cloud, 162 Md. 419 .

The views of the Attorney General as to compliance with the requirements of Art. XVI are advisory only and cannot operate to terminate the suspension of a referred law any more than his opinion that a law is unconstitutional makes that law inoperative. Only a court has the power to declare a statute invalid because it does not comply with constitutional requirements, and only a court can effectively hold that an attempted referral is fatally faulty. The legislative intent in Ch. 1 is clear. That Act was to remain in force until Ch. 205 came into effect either by reason ■of approval of the voters at the polls or because a court earlier held it to be in effect.

It is argued further that Ch. 1 is void as “a mere subterfuge to nullify the people’s power of referendum.” The premise is that since the people reserved the right in the Constitution to suspend a law, once they have exercised the right, the power of the Legislature to deal with the subject matter of the referred law is likewise suspended until the law is voted on. In some States it has been so held. 4 In ³⁰² other States it has been decided that a legislative body may deal with the subject of a law referred but not yet voted bn, particularly if it does so by means of an emergency measure. 5 The powers of the Maryland Legislature are plenary except as restrained or confined by the Federal or State Constitutions. Maryland Committee for Fair Representation v. Tawes, 228 Md. 412. There is no provision in the Maryland Constitution forbidding the Legislature to act on the subject matter of a referred law either during the period between its referral and the vote thereon or after approval or rejection by the voters.

Section 2 of Art. XVI expressly permits the passage of a law coming within its ambit to be passed, which takes effect upon its passage and is not suspendable by referendum proceedings, provided it be approved by three-fifths of all the members elected to each of the two Houses and be declared to be “an emergency law and necessary for the immediate preservation of the public health or safety.” Dinneen v. Rider, 152 Md. 343 . If legislation comes within the purview of Art. XVI, it is for the Legislature and not for the courts to determine whether an emergency exists. Culp v. Com’rs of Chestertown, 154 Md. 620 . Section 2 of Art. XVI provides that no measure which creates or abolishes any office, or changes the salary, term or duty of any officer, or grants any franchise or special privilege or creates any vested right or interest, shall be enacted as an emergency law.

The appellant contends that Albert Ward, the Director of the State Department of Assessments and Taxation, is an officer, and that in confiding the administration of the law to him, Ch. 1 changed the duties of an officer. For reasons discussed later we find this proposition unsound and conclude that unless the petitions of referral of Ch. 205 deprived the Legislature of the right to legislate on its subject matter, Ch. 1 properly was passed as an emergency ³⁰³ law. Chapter 1 declared that it was “the intention of the General Assembly of Maryland to meet the emergency that has arisen as a result of the suspension of the effect of * * * Chapter 205 pending referral thereof to the voters of Maryland,” and the finding of an emergency was a finding the Legislature had the power and the right to make. The Act contained the provision contemplated by Sec. 2 of Art. XVI that it was an emergency measure necessary for the public health and safety, and it was approved by the requisite three-fifths vote.

We see no compelling or persuasive reason, in the Constitution or elsewhere, forbidding the Legislature to meet an emergency by legislating, under Art. XVI, on the subject matter of a bill which has been referred. This conclusion was foreshadowed by the decision in Hammond v. Lancaster, 194 Md. 462 . There Ch. 86 of the Laws of 1949 enacted the Ober Law, dealing with “Sedition and Subversive Activities.” It was approved March 31, to be effective, by its terms, on June 1. After March 31, it became apparent that Ch. 86 would become subject to referendum under Art. XVI of the Maryland Constitution, and its operation suspended.

On April 1, Senate Bill 528 was introduced for the purpose of changing Sec. 3 of Ch. 86 in order to make it an emergency measure. Senate Bill 528 became Ch. 310 of the Laws of 1949 on April 22. In that case below the chancellor found as a fact that at the time of the passage of Ch. 310, and immediately prior thereto, it had become public knowledge that a group of citizens was preparing a referendum petition on Ch. 86. The bill of complaint alleged, inter alia, that Ch. 86, as amended by Ch. 310, was illegal and unconstitutional because it deprived the voters of their right to stay the operation of Ch. 86, a right of which they could not validly be deprived.

Although he found the Ober Act unconstitutional on other grounds, the chancellor did not agree with this contention. He said “Counsel for the complainants contend this action was taken to deliberately thwart the will of the people to prevent a referendum on the Subversives Act of 1949. Whatever may be the reasons, the Court cannot consider them.” In this Court the proponents of the referendum urged in their brief that the ³⁰⁴ declaration of an emergency in a separate and subsequent amendment was not in accord with the Constitution of Maryland, and that the declaration of an emergency was not made for any valid legislative purpose, but for the sole purpose of preventing suspension of the Ober Act pending the vote on the law. This Court rejected these arguments and held that the Legislature alone had the power to determine whether such an emergency as is contemplated by the Constitution exists and that the transformation of Ch. 86 into an emergency law by the enactment of Ch. 310 “was in substantial compliance with the constitutional requirement.” See also Hitchins v. Mayor & C. C. of Cumberland, 215 Md. 315, 325 , wherein we held that the City of Cumberland could effectively modify an ordinance after the filing of a referendum against it.

It is to be noted that Ch. 1, not being an appropriation measure, was subject to referendum under the provisions of Art. XVI. Section 2 thereof provides, inter alia, “An emergency law shall remain in force notwithstanding such petition, but shall stand repealed thirty days after having been rejected by a majority of the qualified electors voting thereon * * Thus, as Ch. 1 declared, the right of referendum on the savings and loan regulatory law was not frustrated — only the right to suspend the operation of the law pending the vote thereon. The reason we rejected appellant’s contention that Ch. 1 could not be an emergency law under Art. XVI since it changed the duties of an officer was because we did not find Mr. Ward to be an officer. (The Court takes judicial notice that he is a most able, efficient and conscientious public servant who holds a position of dignity and importance.) Between 1914 and July 1, 1959, the general functions of the State Department of Assessments and Taxation were performed by the State Tax Commission.

For twenty-eight years Mr. Ward served as Secretary to the Commission. He advised the Commission, kept its records, scheduled its hearings and counselled its staff. But for the fact that the Attorney General was by law designated as the Commission’s counsel, ³⁰⁵ Mr. Ward, a lawyer, could have been classified as its general counsel. As such he would not have been a State officer in the constitutional sense.

State Tax Comm. v. Harrington, 126 Md. 157 . His administrative non-legal duties did not make him an officer, since he exercised no power not derived from the Commission. Baltimore City v. Lyman, 92 Md. 591 . Chapter 757 of the Laws of 1959 abolished the State Tax Commission and in its place established the Maryland Tax Court and the State Department of Assessments and Taxation.

To the latter were assigned the functions of supervising assessments and the administration of corporate affairs. That the Director of the Department was not intended to be an officer anymore than was the Secretary of the Commission is shown, we think, by the fact that he is not required by law to take an oath or to file a bond, that he is a Merit System employee, and that, although the Constitution forbids the raising of the salary of an officer during his term of office, Mr. Ward’s salary has been raised twice by the Legislature since he became Director of the Department. Chapter 42 of the Laws of 1960 raised his salary $555.00 as a scale adjustment and $577.00 as a seniority increment (see “Personnel Detail of the Maryland State Budget for the Fiscal Year ending June 30, 1962,” p. 19). By Ch. 69 of the Laws of 1962 his annual salary was increased from $14,427 to $15,000, effective July 1, 1962.

The Department of Budget and Procurement, in preparing the budgets, the Governor in submitting them, and the Legislature in adopting and passing them, had the view that Mr. Ward was not an officer. Under the tests applied in Gary v. Board of Trustees, 223 Md. 446 , and the cases therein cited, we agree, and, since he was not an officer, Ch. 1 did not violate Art. XYI in putting the administration of the emergency law into his hands. We turn to the argument that the appointment of the receiver ex parte was unjustified. It is claimed that (a) there was no showing of emergency and improper operation of First Continental sufficient to warrant ex parte action; (b) the exhibits required by Maryland Rule 170 b 2 were not filed with the petitions; and (c) First Continental was denied due process ³⁰⁶ of law by the trial court’s refusal to consider its pleadings before the appointment of the receiver.

The contentions may be considered together. Sec. 160L of Ch. 1 provides that if the irregularities complained of in a final order of the Director are not corrected, 6 or if any irregularity complained of in a petition for the appointment of a conservator is not corrected, 7 “or in the case of any emergency, the Director, if in his judgment the public interest requires, acting through the Attorney General, may apply to an equity court for the city or county where the association has its principal Maryland office for the appointment of a receiver, who may be the Director.” Section 160L goes on to provide that the court is authorized to appoint a receiver if it finds that the association: “(1) Is in an impaired or insolvent condition; or (2) is in substantial violation of any valid and applicable law or regulation; or (3) is concealing any of its assets, books or records; or (4) is conducting an unsafe and unsound operation.” The Section concludes: “The procedure in such receivership action, shall be in all other respects in accordance with the practice in such court, including all rights of appeal and review provided by law.” First Continental says that the petition and