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District Court of Appeal, First District, Division 2, California.

McDONOUGH et al. v. GOODCELL, Insurance Com'r.*

Civ. 10876

Decided: November 16, 1938

Leon Samuels and Charles H. Brennan, both of Los Angeles, for petitioners. U.S. Webb, Atty. Gen., Neil Cunningham and Walter K. Olds, Deputy Attys. Gen., for respondent.

The petitioners applied for a permit to transact the bail bond business in San Francisco. The permit was refused and they commenced this proceeding in mandamus to compel the issuance of said permit to them. It involves the proper construction of several provisions of article II, chapter 8, part 2, division 1, of the Insurance Code. The same statute is otherwise known as chapter 653 of the Statutes of 1937, page 1797, § 1830.20 et seq. The proceeding was originally commenced against Samuel L. Carpenter as Insurance Commissioner. Later his commission expired and Rex B. Goodcell was appointed in his place. The permit applied for in the original petition would have expired by the terms of the statute on July 1, 1938. Subsequent to said date a supplemental petition was filed asking for a permit for the year ending July 1, 1939, and also pleading the fact that Rex B. Goodcell had been substituted in the place of Samuel L. Carpenter as respondent. The supplemental petition, among other things, alleges the following facts: The petitioners are citizens and residents of the United States and the state of California, and for some time have been and now are copartners doing business under the firm name and style of McDonough Bros. Samuel L. Carpenter was, prior to July 14, 1938, the duly appointed, qualified and acting insurance commissioner of said state and that Rex B. Goodcell was appointed in his place and is now said insurance commissioner. Petitioners for more than thirty years have been engaged in conducting a bail bond business in San Francisco. Said petitioners have conducted said business honestly, efficiently, and competently and have carried it on fairly and justly in all respects. On the 12th day of July, 1938, petitioners applied for a permit. Their application was made on the form prescribed and provided therefor by the insurance commissioner and was accompanied by proof that petitioners are and each of them is of good moral character. They paid the fee of $50 provided by the statute and offered to furnish a bond in the sum of $5,000 as required by said statute. On July 14, 1938, the insurance commissioner denied said application. Said denial was made arbitrarily, capriciously, unreasonably and unjustly. Said denial was a gross violation and abuse of the duties enjoined on the insurance commissioner and no reason exists why said application should not have been granted. Thereafter the insurance commissioner filed an answer in which he alleged that the petitioners were not fit and proper persons to transact a bail bond business and that they were not of good moral character. He also alleged that the application was not denied without just, or legal, or any cause. Other issues made by the pleadings, if any, will be set forth and discussed as occasion may require.

The controversy was before this court in another proceeding. In the Matter of the Application of Peter P. McDonough for a Writ of Habeas Corpus, Cal.App., 80 P.2d 485. Many of the facts were stated and many legal questions were presented and discussed in that proceeding and will not be repeated except as the writer deems necessary.

Both in the oral arguments and in the briefs much is said to the effect that the statute vests a discretion in the insurance commissioner and therefore a writ of mandamus will not issue. In our former decision in the habeas corpus proceeding we cited Wood v. Strother, 76 Cal. 545, 18 P. 766, 9 Am.St.Rep. 249, the leading case in this state on that subject. That case has been cited and followed down to the present date. Conceding at once the general rule is as claimed by defendant, that case decided in the clearest of terms that it is not sufficient to say a discretion is vested in the officer, but it must also be made to appear that his determination made in the exercise of his discretion was by the statute intended to be final. We also stated in the decision in the habeas corpus proceeding that the statute before us contains no express language to the effect that the determination of the insurance commissioner is final. When the petitioners appeared at the office of the insurance commissioner and made their application they were the proprietors of a business that had been established for upwards of thirty years and a most valuable asset. In effect they were not applying for any new right, but attempting to continue said established business. Under such facts the act of the insurance commissioner in refusing them a permit was two-fold. It not only denied them a permit but, if valid, deprived them of a very valuable property right. If the legislature intended such interpretation of the statute we think it is very clear it would have used language showing the petitioners were entitled to a hearing either before the commissioner or in the proper courts. In Wood v. Strother, supra, at page 554, 18 P. at page 771, speaking through Mr. Commissioner Hayne, the court said: “In the present case there can be no doubt that the auditor was to examine the proceedings, and satisfy himself that they were legal, for the statute expressly says so; and if they were found by the court to be illegal the writ could not issue. But, being perfectly legal, the question is, whether the determination of the auditor was intended to be final; and we can see no ground for saying that it was. There is nothing in the language of the act which shows that it was intended to be final. It certainly would not be final in favor of the contractor. In the numerous cases in which street assessments have been before the court we have never seen it suggested that the signature of the auditor cured previous illegality, and it seems clear that it would not do so. Why, then, should it be final against the contractor, and be conclusive that the proceedings are illegal, when it is apparent that they are not so? If the auditor's determination of this purely legal question were intended to be final, it would have been natural for the charter to have given the parties interested a hearing. Nothing of the kind is provided. The proposition, therefore, must go to this extent: that the auditor is clothed with absolute and despotic authority over the rights of the contractor. We are not prepared to go so far.” The same proposition for the same reason is set forth in Tulare Water Co. v. State Water Comm., 187 Cal. 533, 202 P. 874. On page 538, 202 P. on page 877 the court said: “Mere authority to decide as to the existence of a given fact does not necessarily take the official or board so deciding beyond the reach of a writ of mandate, especially where there is no remedy by appeal.” The insurance commissioner cites and relies on Bank of Italy v. Johnson, 200 Cal. 1, 251 P. 784, and numerous other cases, each of which involved a statute authorizing the public board or officer to make certain determinations which intended to be final. We have shown above the statute before us is not such a statute. But the defendant earnestly contends that the statute vested in him a discretion, that he exercised it, and the courts may not substitute their discretion for his. As we understand this contention it is to the effect that Wood v. Strother, supra, and Tulare Water Co. v. State Water Comm., supra, have been modified or overruled on the point to which we cite them. We think he is entirely mistaken. The doctrine stated in them has, without question, been applied and followed in the most recent cases. Times–Mirror Co. v. Superior Court, 3 Cal.2d 309, 44 P.2d 547; MacPherson v. Superior Court, 22 Cal.App.2d 425, 433, 71 P.2d 91, transfer denied.

It is claimed by the defendant that the hearing in this court must rest on an examination of the record made on said hearing. We think not. If and when the proceeding involves a statute which authorizes an administrative board or officer to hear and determine any certain fact and such statute shows on its face that such determination was intended to be final, such claim is sound. Inglin v. Hoppin, 156 Cal. 483, 105 P. 582. But, when the statute vests in the defendant board or officer the duty of exercising a discretion but the statute on its face does not show that such determination was intended to be final, in an attack in a mandamus proceeding the nature of the discretionary power involved arises as a question of law. That question is solved by a construction of the statute. Having ascertained that the statute does not purport to state that the said determination will be final, then it is for the courts to determine the questions of fact. Such issues will be determined by the courts without regard to any previous determination by the defendant board or officer. Drummey v. State Board of Funeral Directors, Cal.App., 77 P.2d 912; Ex parte McDonough, Cal.App., 80 P.2d 485. In Stockton & V. Railroad Co. v. Stockton, 51 Cal. 328, at page 339, the court said: “We had a similar question before us in the case of the People ex rel. Linden v. Supervisors of Alameda County, 45 Cal. 395. In that case, a petition, signed by the requisite number of qualified electors, had been presented to the Board of Supervisors, requesting that an election be called on the question of removing the county seat. The Board refused to order an election, and an alternative writ of mandate was issued out of this Court. The proceedings for the removal of the county seat were had under section 3976 et seq. of the Political Code; and in its answer to the suit the Board set up as one of its defenses that, under the statute, it was its duty to determine whether the petition was signed by the requisite number of qualified electors, and it was not satisfied from the proofs offered in support of the petition that it was so signed; and for that, among other reasons, had declined to order an election. We struck out this portion of the answer, as constituting no defense, and ordered an issue to be tried whether, in point of fact, the petition was signed by the requisite number of qualified electors. Our view of the law then was, and yet is, that if an official duty is to be performed on the happening of an event, the officer cannot arbitrarily or capriciously refuse to perform it, after the event has happened, on the plea that he is not satisfied that it has happened. If the fact exists, and is established by sufficient proofs, it is his legal duty to be satisfied, and to act accordingly. We deem it unnecessary to consider the other point discussed by counsel.” (Italics ours.) That rule was cited and followed in Wood v. Strother, supra; Inglin v. Hoppin, supra; and other cases.

When, as alleged by the petitioners, they presented to the insurance commissioner their application for a permit, conceded to be complete and regular in all respects, they made a prima facie showing. He could have granted the permit thereon. If in doubt as to fact or law, he could legally have refused to act. If he did so, his act could have been reviewed by the courts in a mandamus proceeding. Riley v. Chambers, 181 Cal. 589, 595, 185 P. 855, 8 A.L.R. 418. In such proceeding based on such facts, no one would contend that either party would be limited to the record then before the commissioner but all pertinent facts would be admissible in evidence. However, the commissioner, without authority of law, gave notice and held a hearing. Such hearing clearly was non juridicus and defendant is not entitled to base any claim thereon. He seems to contend that he was authorized by the statute to make a determination having the force and effect of a judgment. We think not. The courts were the tribunals to determine any disputed question. Riley v. Chambers, supra. If the statute is to be otherwise construed it is invalid for it does not in terms provide for a notice and hearing, nor does it suffice to show that a notice was in fact given and a hearing was in fact held. In Matter of Lambert, 134 Cal. 626, at page 634, 66 P. 851, at page 854, 55 L.R.A. 856, 86 Am.St.Rep. 296, the court said: “In the absence from the statute of any requirement of notice to the person, any notice that might be given him would be without legal force and authority, and consequently, whether acted upon by him or disregarded, the proceeding would be equally ineffective. ‘It is not enough that he may by chance have notice, or that he may, as a matter of favor, have a hearing. The law must require notice to him, and give him the right to a hearing, and opportunity to be heard. The constitutional validity of a law is to be tested not by what has been done under it, but by what may by its authority be done.’ Stuart v. Palmer, 74 N.Y. [183], 188, 30 Am.Rep. [289], 291. ‘It is not what has been done, or ordinarily would be done, under a statute, but what might be done under it, that determines whether it infringes upon the constitutional right of the citizen. The constitution guards against the chances of infringement.’ Bennett v. Davis, 90 Me. [102], 105, 37 A. 864, 865.”See, also, People v. Broad, 216 Cal. 1, 7, 12 P.2d 941.

Nor may the power to hear and determine be inferred. (See authorities just cited.) Moreover, there is no such thing as a doubtful power. Any fair, reasonable doubt concerning the existence of the power is resolved by the courts against the exercise thereof and the power is denied. Von Schmidt v. Widber, 105 Cal. 151, 38 P. 682.

However, after the pleadings in the instant case had been settled, both parties stipulated that the instant case could be heard and determined on the evidence contained in the transcript of the proceedings so held before the commissioner.

The transcript contains nearly one thousand pages. More than forty witnesses were called and examined. Numerous documents were introduced in evidence. There was an abundance of evidence that the petitioners are of good moral character and fit and proper persons to conduct a bail bond business. They assert there was no evidence to the contrary. We think there was and we cite the testimony given by District Attorney Matthew Brady, Assistant District Attorney William P. Golden, Chief of Police William J. Quinn, Deputy Attorney General William F. Cleary, Foreman of the Grand Jury Marshall F. Dill, Philip F. Landis, President of the Junior Chamber of Commerce, Leslie C. Gillen, assistant district attorney, and Theodore J. Roche, former chairman of the police commissioners of San Francisco. We have read the testimony of each. As we understand the record each witness testified that petitioners were of good moral character and were fit and proper persons, except for their conduct in connection with the police department as shown by the records of a certain grand jury investigation held by said jury in San Francisco in the years 1936–1937. That investigation was held to determine if certain police officers were levying and collecting graft fees from certain businesses. The investigation was much discussed in the municipality and many items appeared in the public press. As to the acts of the petitioners, the chief of police, the district attorney, and the deputy attorney general, testified that no evidence was elicited against petitioners that would support the charge of any crime defined by law. However, it was a conceded fact that Peter P. McDonough was called before the grand jury as a witness and refused to testify on the ground that his evidence might tend to incriminate him. There was also evidence that he befriended accused policemen. Each of the witnesses above named and some other witnesses pointedly specified such conduct and, basing their evidence solely thereon and limiting it thereto, they testified that the petitioners were not of good moral character and were not fit and proper persons to engage in the bail bond business. The question arises, Was the reason so assigned sufficient to warrant a judgment denying the petitioners the permit applied for? We think not. Section 1830.24 of the Insurance Code, St.1937, p. 1798, is as follows: “1830.24. The commissioner may issue a written permit to any person wishing to engage in the bail bond business upon application therefor accompanied by proof that the applicant is a fit and proper person to engage in such business.” If the legislature had added to said section, “provided that no permit shall be issued to any person who heretofore befriended accused policemen or refused to testify, pleading his constitutional right, when called as a witness before a grand jury”, we would have a concrete example. But, that such a provision would have been void is settled law. As shown above the petitioners had a valuable property right consisting of an established business at the time their application was filed and for thirty years prior thereto. After the enactment of the Bail Bond Act they had committed no crime. To deny them a permit was to destroy said valuable property right. During the civil war some clergymen and lawyers, as well as others, aligned themselves with the confederates and in so doing they committed violations of different penal statutes. Some offenses were grave, were indictable, and, on conviction, the punishment prescribed was severe. But no statute provided that any one of said acts was punishable by forfeiture of any or all property rights. The Reverend Mr. Cummings, a priest of the Roman Catholic Church, was one of such persons. In 1865, the state of Missouri amended its Constitution. The third, sixth, seventh, ninth, and fourteenth sections of the second article of the amended Constitution concerned an exculpatory oath, and for the punishment of those who acted in violation thereof. In terms said provisions were applicable to all persons acting as ministers of the gospel. Mr. Cummings refused to take the oath and commenced an action to restrain the enforcement of said provisions. Cummings v. State of Missouri, 71 U.S. 277, 4 Wall. 277, 18 L.Ed. 356. If he had taken the oath it would have been necessary for him to have alleged: “that he had never left the state of Missouri for the purpose of avoiding enrolment for draft into the military service of the United States”; that he had never “been in armed hostility to the United States or to the lawful authorities thereof”; had never “by act or word manifested his adherence to the cause of such enemies or his desire for their triumph over the armies of the United States, or his sympathy for those engaged in exciting or carrying on rebellion against the United States, etc.” He had done some of those things. To take the oath would have been to commit perjury. After an extended examination of the authorities, Mr. Justice Field, writing the opinion of the court, reached the conclusion that said constitutional provisions were void and as to the acts of Mr. Cummings, they were ex post facto. We quote from the decision [[[[page 320]: “The deprivation of any rights, civil or political, previously enjoyed, may be punishment, the circumstances attending and the causes of the deprivation determining this fact. * The Constitution deals with substance, not shadows. Its inhibition was levelled at the thing, not the name. It intended that the rights of the citizen should be secure against deprivation for past conduct by legislative enactment, under any form, however disguised. If the inhibition can be evaded by the form of the enactment, its insertion in the fundamental law was a vain and futile proceeding. * To make the enjoyment of a right dependent upon an impossible condition is equivalent to an absolute denial of the right under any condition, and such denial, enforced for a past act, is nothing less than punishment imposed for that act. It is a misapplication of terms to call it anything else. Now, some of the acts to which the expurgatory oath is directed were not offences at the time they were committed. It was no offence against any law to enter or leave the State of Missouri for the purpose of avoiding enrolment or draft in the military service of the United States, however much the evasion of such service might be the subject of moral censure. Clauses which prescribe a penalty for an act of this nature are within the terms of the definition of an ex post facto law—‘they impose a punishment for an act not punishable at the time it was committed.’ ” (Italics ours.) A.H. Garland, an attorney at law, enlisted in the confederate army. The congress passed an act providing for an exculpatory oath to be executed by those applying for admission to practice law. Mr. Garland refused to take the oath, was arrested, and applied for a writ of habeas corpus. The case entitled Ex Parte Garland, 71 U.S. 333, 4 Wall. 333, 18 L.Ed. 366, reaches similar conclusions. People v. Pagni, 69 Cal.App. 94, 230 P. 1001, was a prosecution for violation of the Wright Act. The prosecution sought to plead an offense committed prior to the enactment of the Wright Act for the purpose of increasing the defendant's punishment for the violation of a provision contained in the Wright Act. In a learned opinion written by Mr. Justice Hart, the Third District Court of Appeal followed the doctrine in Cummings v. Missouri, supra, and similar cases, and held that the contention of the prosecution could not be sustained. For these reasons it seems clear that the evidence of and concerning the good moral character of the petitioners is not impugned by the fact that Peter P. McDonough refused to testify before the grand jury or that he befriended accused policemen. Furthermore the evidence as to whether the petitioners possessed good moral characters and were fit and proper persons to conduct a bail bond business turned wholly on their acts of omission or commission done before the enactment of the statute before us. As to the petitioners the statute was inapplicable because it was ex post facto and did not afford a basis to take from petitioners their valuable property right in an established business.

The conclusion just stated is reinforced by another provision contained in the statute. If hereafter any permittee does or performs any act showing him to be not of good moral character, or showing him to be not a fit and proper person to conduct a bail bond business, his permit may be revoked or cancelled by the commissioner. Sec. 1830.32. Moreover, section 1830.40 and section 1830.42 contain other salutary rules governing the holders of permits. In other words, if after a permit is granted to the petitioners, they or either of them commit any of the acts above specified, it may be that grounds for a revocation of their permit may arise, but acts committed prior to the enactment of the statute may not be so used to destroy a valuable property right.

Let a peremptory writ issue as prayed.

I dissent. Further consideration of the sections of the Insurance Code and of the authorities dealing with similar statutes leads me to certain conclusions which are not entirely in accord with some of the language found in our opinion in the related habeas corpus proceeding. Ex parte McDonough, Cal.App., 80 P.2d 485. It therefore appears appropriate that the reasons which lead me to these conclusions should be set forth at some length.

The sections of the Insurance Code are strikingly similar to certain other statutes which have been before the courts. Only one of said sections need be quoted: Section 1830.28 thereof provides, “The commissioner may refuse to issue any permit applied for unless it is made to appear that the applicant therefor is of good moral character and a fit and proper person to engage in the bail bond business”.

In Leach v. Daugherty, 73 Cal.App. 83, 238 P. 160, the court considered our own Corporate Securities Act. That act required the issuance of a certificate if the commissioner was satisfied “of the good business reputation of the applicant”. St.1917, p. 677, § 6. The act was held to be constitutional, the court saying on page 87, 238 P. on page 161, “It is well-settled principle of law in this state that by legislative act a commission or board may be empowered to ascertain the existence of facts, upon the finding of which may depend the right to continue in the practice of a profession or a regulated business. Ex parte Whitley, 144 Cal. 167, 77 P. 879, 1 Ann.Cas. 13; Suckow v. Alderson, 182 Cal. 247, 187 P. 965; Hewitt v. Board, 148 Cal. [[[[590], 592, 84 P. 39, 3 L.R.A.,N.S., 896, 113 Am.St.Rep. 315, 7 Ann.Cas. 750; Riley v. Chambers, 181 Cal. 589, 8 A.L.R. 418, 185 P. 855. And, as is pointed out in the case of Hall v. Geiger–Jones Co., 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann.Cas.1917C, 643, supra, and authorities there cited, the same rule obtains where the inquiry is to be made by such commission or board preliminarily to the issuance of a license to transact a regulated vocation in the first instance.”

Other authorities dealing with somewhat similar statutes are as follows: Riley v. Chambers, 181 Cal. 589, 185 P. 855, 8 A.L.R. 418 (Real Estate Brokers Act requiring a showing that the applicant was “honest, truthful and of good reputation” St.1919, p. 1255, § 9); Hall v. Geiger–Jones Co., 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann.Cas.1917C, 643 (Ohio Corporate Securities Act Gen.Code §§ 6373–1 to 6373–24, providing for the issuance of a license if the commissioner was satisfied of the “good business repute” of the applicant); Gundling v. Chicago, 177 U.S. 183, 20 S.Ct. 633, 44 L.Ed. 725 (ordinance requiring a showing that an applicant for a license to sell cigarettes was “of good character and reputation”); In re Halck, 215 Cal. 500, 11 P.2d 389 (Personal Property Brokers Act requiring the issuance of a license if the commissioner found that “the financial responsibility, experience, character and general fitness” of the applicant were “such as to command the confidence of the community *” St.1931, p. 560, § 10). Mention may also be made of People v. Globe Grain & Milling Co., 211 Cal. 121, 294 P. 3; Tarpey v. McClure, 190 Cal. 593, 213 P. 983 and Bank of Italy v. Johnson, 200 Cal. 1, 251 P. 784, involving respectively statutes which conferred powers upon public officers with respect to the issuance of permits under the Fish Reduction Act, the Water Storage Act and the Bank Act.

All of said statutes were held to confer discretionary power upon the various officers involved. In referring to the power conferred, the court said in Gundling v. Chicago, supra, at page 187, 20 S.Ct. at page 635, “and thus the fact of fitness is submitted to the judgment of the officer, and it calls for the exercise of a discretion of a judicial nature by him”. Many of said statutes, like the one before us, contained no provision for a hearing before such officers but all of said statutes were held to be constitutional against the attack that they conferred arbitrary power and vested uncontrolled discretion in such officers.

In People v. Globe Grain & Milling Company, supra, at page 126, 294 P. at page 5, the court quoted from People v. Monterey Fish Products Co., 195 Cal. 548, 234 P. 398, 38 A.L.R. 1186, where the court said, “The Legislature may, without violating any rule or principle of the Constitution, confer upon an administrative board or officer a large measure of discretion, provided the exercise thereof is guided and controlled by rules prescribed therefor. Tarpey v. McClure, 190 Cal. 593, 213 P. 983, and cases cited.” Continuing the court compared the statutes involved in the two cases and said, “The only substantial difference between them, so far as concerns the question of administrative discretion, is that the original statute expressly provides for a hearing. The difference is not material. The essential requirement of due process is merely that the administrative officer or body be required to determine the existence or nonexistence of the necessary facts before any decision is made. If the statute requires this, it does not vest an uncontrolled discretion, and the officer or body may not act arbitrarily. Riley v. Chambers, 181 Cal. 589, 185 P. 855, 8 A.L.R. 418; Doble Steam Motors Corp. v. Daugherty, 195 Cal. 158, 232 P. 140; Ex parte McManus, 151 Cal. 331, 90 P. 702.”

In re Halck, supra, the court said on pages 503 and 504, 11 P.2d on page 391, “This means no more than that the commissioner may decline to license a person or entity if, on the showing made, there is a reasonable ground for the conclusion that the applicant would not operate his business honestly, fairly, or efficiently. This confers no arbitrary power. If the commissioner acts to the prejudice of an applicant, capriciously, arbitrarily, or solely without basis of right, his act may be supervised and controlled by the courts. The language complained of means no more than similar language construed in the following cases: Riley v. Chambers, 181 Cal. 589, 185 P. 855, 8 A.L.R. 418; Tarpey v. McClure, 190 Cal. 593, 213 P. 983; People v. Globe Grain & Mill. Co., 211 Cal. 121, 294 P. 3; Hall v. Geiger–Jones, 242 U.S. 539, 37 S.Ct. 217, 61 L.Ed. 480, L.R.A.1917F, 514, Ann.Cas.1917C 643.”

It therefore appears that the statute before us conferred discretionary powers rather than mere ministerial powers upon the insurance commissioner. We pointed out the distinction between statutes conferring discretionary powers and those conferring mere ministerial powers in our opinion in Drummey v. Board of Funeral Directors, Cal.App., 77 P.2d 912. That case has been taken over by the Supreme Court but I believe that the discussion of the general subject and the authorities cited in that opinion are pertinent here. From said authorities it appears that the only issue which is properly before us in this mandamus proceeding is whether the insurance commissioner abused his discretion in determining that petitioners did not have the required qualifications and in denying them a license. Bank of Italy v. Johnson, 200 Cal. 1, 251 P. 784, and other authorities cited.

The case of Cranford v. Jordan, 7 Cal.2d 465, 61 P.2d 45, is one of the most recent cases on the general subject of the scope of mandamus proceedings. It involved a proceeding against the secretary of state, an officer whose ordinary powers and duties are ministerial in character. The court was considering section 291 of the Civil Code which provides that he “shall not file articles which set forth a name which is likely to mislead the public”. The court said at page 467, 61 P.2d at page 46, “It is his opinion that the name is one which would tend to mislead the public. The section vests in him a certain discretionary power which he may be compelled to exercise, but which, in the absence of an abuse of discretion, we should not compel him to exercise in any particular manner. In other words, where it appears that there is a reasonable basis for the action of a public officer possessing discretionary power, we cannot substitute our judgment for his.”

It therefore appears that the language in our opinion in the related habeas corpus proceeding (Ex parte McDonough, supra) went too far when we indicated on page 487 that the powers conferred upon the insurance commissioner were mere ministerial powers similar to certain ministerial powers conferred upon a county clerk. The powers here conferred were more than mere ministerial powers and it was not necessary for us to determine that they were mere ministerial powers in order to uphold the statute as constitutional.

When this proceeding was filed, the parties were first requested to submit briefs on the question of what issue was to be considered by this court in this proceeding. They did so and this court announced in open court its preliminary opinion on the question as follows: “Upon consideration of the authorities submitted, the court is of the opinion that the issue to be tried here is whether in the denial of the permit, the commissioner abused his discretion or acted arbitrarily, capriciously or fraudulently. The parties having stipulated that the issue may be heard and determined upon the transcript of the proceedings had before the commissioner upon the first application, we deem it proper to state that the burden is upon the petitioners to show that there were no facts before the commissioner which would reasonably justify his denial of the application and that his act was therefore an abuse of discretion.” Said opinion was not concurred in by Mr. Justice Sturtevant but was concurred in by the majority of the court and was announced for the guidance of the parties. Thereafter further briefs were filed and the proceeding was submitted for determination.

I believe this court correctly indicated the issue in said preliminary opinion. The case of Wood v. Strother, 76 Cal. 545, 18 P. 766, 9 Am.St.Rep. 249, and other cases cited in the majority opinion dealing with the ordinary powers conferred upon auditors, county clerks and the like do not appear to be in point here. The ordinary powers conferred upon such officers are mere ministerial powers. Other cases cited in the majority opinion presented closer questions as to the nature of the powers conferred and we pointed out in our opinion in Drummey v. Board of Funeral Directors, supra, that difficulty is encountered at times in determining the nature of the powers conferred by particular statutes. But the authorities above set forth clearly indicate that the powers conferred upon the commissioner by the Insurance Code were discretionary powers and that his decisions should be held to possess that degree of finality which renders them subject to attack only upon a showing of an abuse of discretion. There is nothing in statutes considered in Riley v. Chambers, supra; Hall v. Geiger–Jones Co., supra; Gundling v. Chicago, supra; Leach v. Daugherty, supra; In re Halck, supra; People v. Globe, Grain & Milling Co., supra; Tarpey v. McClure, supra; Bank of Italy v. Johnson, supra, and Cranford v. Jordan, supra, which justifies the conclusion that the decisions of the public officers under the provisions of said statutes should be accorded any greater finality than the decisions of the insurance commissioner under the provisions of the Insurance Code.

The question of whether the insurance commissioner did abuse his discretion herein has been presented to this court upon the transcript of the hearing had before the commissioner. I cannot agree that said hearing was held “without authority of law”. While there was no express authority in the Insurance Code for the holding of such hearing, I believe such authority may be implied. It was a logical means by which the commissioner could obtain evidence upon the issue which he was called upon to decide and the very fact that he held the hearing has some tendency to show that he did not act arbitrarily and capriciously in denying the permit.

In support of their claim that the commissioner abused his discretion, petitioners contend that there is no competent evidence in said transcript to sustain the commissioner's finding that petitioners were not of good moral character and were not fit and proper persons to engage in the bail bond business. In my opinion, this contention cannot be sustained. The transcript is voluminous and contains evidence for and against petitioners. In determining whether petitioners were of good moral character, it was entirely proper for the commissioner to hear and consider evidence of the general reputation of petitioners. In re Vandiveer, 4 Cal.App. 650, 654, 88 P. 993; 10 Cal.Jur. 1046. It appears that there was abundant competent evidence to sustain the commissioner's finding and decision in the testimony given by the district attorney, two assistant district attorneys, the deputy attorney general, the chief of police, the foreman of the grand jury, a former chairman of the police commission and others. It is true that certain witnesses mentioned the fact that one of the petitioners had refused to testify before the grand jury upon the ground that his testimony might tend to incriminate him, but it does not appear that the testimony of the witnesses regarding the bad general reputation of the petitioners was based solely upon that fact. In any event, the evidence of bad general reputation being admissible on the issue of character, it is immaterial to consider the reason why petitioners had attained a bad general reputation if, in fact, they had attained such reputation, as testified by the witnesses. As has been said, “The best we can do is to judge the character of our neighbors by the estimation in which they are held in the community”. In re Vandiveer, supra, page 654, 88 P. page 994.

I cannot agree with the conclusion that the statute here was inapplicable as to petitioners “because it was ex post facto”. It did not purport to punish petitioners for any act done prior to the enactment of the statute. It did purport to regulate the bail bond business and to permit only persons of good moral character to engage in said business after the enactment of the statute. There is nothing novel in such legislation as may be seen from the authorities cited above. The issue before the commissioner was whether petitioners were of good moral character and fit and proper persons to engage in the bail bond business. Neither the fact that petitioners may not have been shown to have committed any crime after the enactment of the statute nor the fact that they may not have been indicted as the result of a particular grand jury investigation, can be said to be conclusive on the issue thus presented.

In my opinion, petitioners have failed to show any abuse of discretion upon the part of the insurance commissioner. The alternative writ should therefore be discharged and the peremptory writ should be denied.


I concur: NOURSE, P.J.

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