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Recorder of Deeds all powers and duties previously exercised by the Recorder of Deeds relating to business corporations and transferred them to the Commissioners. Section 120 imposed upon the Commissioners responsibility for the administration and enforcement of the act, and authorized the Commissioners to transfer any functions to an agent designated by them.

Upon the enactment of the District of Columbia Business Corporation Act (1954) transferring all corporate functions to the Commissioners, and the Commissioners having been authorized and expected to delegate their functions to a Superintendent of Corporations, the bar association assumed that the act would be administered by a new Department of Corporations which would have no connection with the Recorder of Deeds (except that the Recorder under the act would receive copies of certain documents for recordation). Subsequent to the enactment of the law, a study was made by the Commissioners to determine what place the Department would have in the structure of the District of Columbia government. On August 16, 1954, it was announced in the District of Columbia Register, volume 1, No. 3, that the Office of Business Corporations would be lodged in the Office of the Recorder of Deeds-much to the consternation of the sponsors of the legislation. In September 1954, the Commissioners issued an order (Organization Order No. 101), delegating to the Office of the Recorder of Deeds, under the supervision of the Recorder of Deeds, full authority over functions created by the statute, including the power to redelegate to other officials, such of the powers delegated as in his judgment may be warranted. The order established in the Office of the Recorder of Deeds the position of Superintendent of Corporation. Pursuant to that order, the Recorder of Deeds, on December 2, 1954, delegated the same functions to the Superintendent of Corporations, but he provided that the authority shall be "exercised *** subject to the supervision, administrative direction and control of the Recorder of Deeds, District of Columbia."

The bar association strongly protested to the Commissioners against that order. As indicated in newspaper articles which appeared on January 25, 1955, in the Evening Star and the Washington Post and Times-Herald (copies of which are attached hereto): "Officials of the District Bar Association asked the Commissioners to remove the new District Office of Corporations from the jurisdiction of the Recorder of Deeds and place it directly under the Commissioners." The association's representatives told the Commissioners that the arrangement was "incongruous and inconsistent with sound principles of governmental administration." They pointed out that if the Corporation Superintendent had authority to operate only as a matter of grace by virtue of redelegations from the Recorder of Deeds, it would be possible at a subsequent date for the Recorder to strip him of his authority by canceling his authority. The Commissioners' response was to leave the Superintendent of Corporations in the Office of the Recorder of Deeds, but to require the Recorder to modify his redelegation by striking from the delegation the provision that "This authority *** shall be subject to the supervision, administrative direction and control of the Recorder of Deeds, District of Columbia."

During the intervening years to date, the bar association has made known to the Commissioners its opposition to the present arrangement, including the serious point that a question of law exists by virtue of the delegation of the powers by the Commissioners to the Recorder and redelegation of some of the authority to the Superintendent. To date, however, the Commissioners of the District of Columbia have declined to give the Superintendent of Corporations the status which the bar association believes that office deserves.

PROVISIONS OF THE BILL

The proposed H.R. 7173 would revest in the Commissioners of the District of Columbia all powers and functions hitherto transferred by them to the Office of the Recorder of Deeds, under the District of Columbia Business Corporation Act and the District of Columbia Nonprofit Corporation Act. The bill authorizes the District of Columbia Commissioners, however, to delegate any or all of the powers, rights, duties, and functions vested in them whenever they determine to do so, but such transfer must be made directly to a department in the government of the District of Columbia, to be known as the Department of Corporations. At the head of such Department, there shall be a Superintendent appointed by the Commissioners and subject to removal by them for cause. The Superintendent shall have such authority and perform such functions as are delegated to him by the Commissioners. (A section-by-section summary of the provisions of the bill is attached to this statement.)

54-907-65--2

This bill would therefore correct the highly anomalous situation which now exists in the government of the District of Columbia whereby the administration of the corporation laws are delegated to the Recorder of Deeds, who in turn subdelegates only such authority as he determines to a Superintendent of Corporations.

LEGAL PROBLEM

The fact that the present Superintendent of Corporations functions only by virtue of redelegations of authority from the Recorder of Deeds, who in turn derives his authority by delegation, has raised serious questions of law and could conceivably place in jeopardy the legal existence or status of corporations organized under the present arrangement. As already indicated, the Commissioners of the District of Columbia, by Organization Order No. 101, delegated certain of their functions under the Business Corporation Act to the Recorder of Deeds. The Recorder of Deeds redelegated to the Superintendent of Corporations all of the functions which he had received from the District of Columbia Commissioners, subject, however, to the supervision, administrative direction and control of the Recorder of Deeds, District of Columbia. After the bar association's protest, the delegation was supplanted by a new delegation dated February 18, 1955, from which there was omitted the phrase "subject to the supervision, direction and control of the Recorder."

Subsequently the Organization Order No. 101 was superseded in its entirety and replaced by a delegation contained in Order No. 63-197 of January 24, 1963. This order provided that the Recorder of Deeds is continued as the agent of the Commissioners to perform all functions vested in the Commissioners by the District of Columbia Business Corporation Act, except the functions of promulgating regulations and increasing or decreasing fees. The Recorder was authorized to redelegate to the Superintendent of Corporations from time to time any and all the functions delegated to him. Furtherinore, the Recorder of Deeds was designated as the agent of the Commissioners to perform any functions vested in them by the District of Columbia Nonprofit Corporation Act, and he was authorized to delegate to the Superintendent from time to time any and all the functions delegated to the Recorder under that statute.

The bar association has no information as to whether or not any new redelegation was executed by the Recorder of Deeds pursuant to Order No. 63-197, which is now the only delegation from the Commissioners to the Recorder. Incredible as it may appear, when the Bar Association of the District of Columbia, in June 1965, requested from the Commissioners of the District of Columbia copies of the delegations of authority by the Commissioners to the Recorder of Deeds under both statutes and redelegations from the Recorder to the Superintendent, the Commissioners furnished only the delegations to the Recorder and declined to furnish copies of redelegation of authority from the Recorder since they were "purely internal administrative matters." (See copy of letter attached dated June 7, 1965, from F. E. Robshaw, secretary, to Mr. Oliver Gasch, president of the bar association.) Consequently, the bar association is without any knowledge or information that any delegations have been made at all to the Superintendent under the only delegation now in effect from the Commissioners to the Recorder. Even if the redelegations of February 18, 1955 (as supplemented by two additional orders of Apr. 22, 1955 and Feb. 20, 1960), are as a matter of law still in full force and effect, apparently there has never been any redelegation of any kind from the Recorder of Deeds to the Superintendent of Corporations with regard to his powers and functions under the District of Columbia Nonprofit Corporation Act. As a result of these delegations, redelegations, cancellations and nondelegations, many legal problems arise. Although the Commissioners' Organization Order No. 101 of September 16, 1954, established in the Office of the Recorder of Deeds the position of Superintendent of Corporations, that order was superseded in its entirety by Order No. 63-197 of January 24, 1963. The latter order does not specifically establish the position of the Superintendent of Corporations (although it does provide that the Recorder may delegate to "the Superintendent of Corporations"). A question may arise as to whether the position of Superintendent now legally exists. Additionally, if Order No. 63-197 supersedes Order No. 101, and the only redelegations by the Recorder to the Superintendent are pursuant to to Order No. 101, the question may arise as to whether the redelegations are still in full force and effect or have any validity. Further, if as appears to be true, there has been no redelegation of authority by the Recorder to the Superintendent under the Nonprofit Corporation Act, it may very well be that, as a practical

matter, at present in the District of Columbia there are two officials attempting to administer the corporation statutes of the District of Columbia.2

PROBLEMS REGARDING DELEGATIONS

Aside from these details, there is a fundamental problem of law arising out of the attempt to redelegate delegated authority. The delegation of administrative authority from the Commissioners to the Recorder of Deeds and subsequently by him to the Superintendent of Corporations conflicts with the maxim, Delegata potestas non potest delegari, which roughly means "that a delegated power may not be further delegated by the person to whom such power is delegated." 3 Although this maxim no longer is the stringent principle of constitutional law and statutory construction it once was, it still occupies a vibrant place. The general rule today is that ministerial duties may be delegated, but discretionary duties may not without specific legislative authority. The Corporation Code (District of Columbia Code, sec. 29-935) authorizes the Commissioners to delegate their authority under the act to an agent, and as pointed out, supra, this agent was intended to be the Superintendent of Corporations, not the Recorder of Deeds. The statute says nothing concerning a subdelegation. Moreover, the Commissioners must necessarily derive all their authority from congressional enactments and have no authority beyond that conferred to delegate and subdelegate authority.5

The Supreme Court has always been aware of the need for delegation of authority, but has still paid strict attention to the language of the statute, the nature of the delegated power, and the legislative history involved. In Cudahy Packing Co. v. Holland (315 U.S. 357 (1942)), the Court refused to allow a subdelegation of the subpoena power, pointing out that power involved was not ministerial and that the delegation had not been authorized by statute. Thus an unauthorized subdelegation of powers may still be declared invalid.

NONOBSERVANCE OF REDELEGATIONS

Even if the delegations by the Recorder to the Superintendent are legally effective and are now in effect, we have reason to believe that the Office of the Recorder of Deeds may not be complying with its own redelegation. By way of illustration: The redelegation of February 18, 1955, provides, among other things, that the Superintendent shall have full authority over the issuance of certificates of incorporation, reincorporation, amendment, etc., and that the Superintendent has full authority to prescribe and furnish forms for reports and other documents required to be filed under the act. For many years all forms used under the Business Corporation Act were designed by the Superintendent of Corporations and bore his title on such documents. In recent years, despite the redelegation, various certificates have been issued under that act bearing the title of the Recorder of Deeds; the official business corporation forms have been drafted by the Office of the Recorder of Deeds; and those forms bear the title "Office of the Recorder of Deeds, District of Columbia, Corporation Division" instead of "District of Columbia, Office of the Superintendent of Corporations."

Although the redelegation provides that the Superintedent has full authority to collect all fees, licenses, taxes, and other charges prescribed by the act, and for many years the forms bore instructions that checks should be payable to the Superintendent of Corporations, the new forms prepared by the Recorder of Deeds Office now bear the legend "Make check payable to the Recorder of Deeds, District of Columbia."

The District of Columbia Business Corporation Act and the District of Columbia Nonprofit Corporation Act are published as sections of the District of Columbia Code. Although the text of the code refers only to the Commissioners, footnotes to section 29-935 (which is section 120 of the act) sets forth in the text of the delegation of authority by the Commissioners to the Recorder of Deeds. Since nowhere in the texts or footnotes or appendix of the code is there any reference to a redelegation by the Recorder to the Superintendent of Corporations, no out-of-town attorney and no District of Columbia attorney, except those who are very closely familiar with the entire topic, would know from reading the code that there is a Superintendent of Corporations or that he should seek the Superintendent of Corporations to discuss any problems he may have or go to the office of the Superintendent to file documents.

342 Am. Jur., Pub. Admin. Law, sec. 73.

4 Ibid., see McQuillin, Municipal Corporations, secs. 10.41-10.42 (1949).

See Hazard v. Blessing (2 F. 2d 916 (D.C. Cir. 1924)); Fay v. Mcfarland (32 App. D.C. 295, 299 (1908)); 27 C.J.S., Dist. of Col. sec. 5a which states: "In the absence of express provision, there is no power in the commissioners to delegate to others the authority vested in them.

See also Borg-Johnson Electronics v. Christenberry (169 F. Supp. 746 (S.D.N.Y. 1959)), where an invalid subdelegation was recently successfully attacked.

NONPROFIT CORPORATION FORMS

Although section 140 of the District of Columbia Business Corporation Act and 96 of the Nonprofit Corporation Act provide that forms for all documents to be filed shall be furnished by the Commissioners, and although for years the Superintendent of Corporations did furnish to applicants upon request forms for all purposes, the bar association is informed that no forms of any kind have been published and distributed for use under the Nonprofit Corporation Act. Instead a booklet has been published entitled "Handbook of Forms," bearing the caption "Office of the Recorder of Deeds, District of Columbia Nonprofit Corporation." No reference is made any place in the book to the Superintendent of Corporations or the Office of the Superintendent of Corporations. All sample forms in the pamphlet bear the legend "To the Recorder of Deeds, Washington, D.C." The instructions direct all mailing to "Office of the Recorder of Deeds, District of Columbia, Corporation Division, Sixth and D Streets NW., Washington 1, D.C." It would seem that furnishing a handbook of forms rather than furnishing forms may be a noncompliance with the District of Columbia Nonprofit Corporation Act.

Although the Recorder delegated to the Superintendent the authority to act as agent for corporations who fail to maintain registered agents or who transact business without a certificate of authority, upon whom legal process may be served, there is reason to believe that the Recorder of Deeds Office is now assuming that responsibility. If the Office of the Recorder of Deeds is in fact exercising this authority, it is conceivable that the rights of private parties in privave litigation involving the service of process upon the Commisisoners may be seriously jeopardized and that the valuable rights may be lost forever.

IMPORTANT LEGAL REVIEWS

In addition to the legal questions arising out of the delegations and redelegations, other problems arise out of the present arrangement under which an administrator of two corporation laws functions under a recording official. Under the Business Corporation Act and Nonprofit Corporation Act, there are many important administrative and discretionary acts which must be performed. These are not merely ministerial but involve the carefully exercised judgment and skill of an administrative attorney. Unlike the Recorder of Deeds, who by statute is required only to record deeds and other instruments which have been acknowledged and file other instruments without acknowledgments, and have charge and custody of certain records and papers (45-701 District of Columbia Code), the Superintendent of Corporations must interpret and construe many sections of the two corporation statutes. There are 27 different sections in the Business Corporation Act and the Nonprofit Corporation Act dealing with statements, articles, applications, and certificates which are required or permitted to be filed under the provisions of these 2 laws (18 of them are contained in the Business Corporation Act and 9 in the Nonprofit Corporation Act). Under these provisions, various legal documents must be presented to the Superintendent and if he finds that the statement or articles or application "conform to law," he must issue certificates. Obviously this requires a legal analysis and the Superintendent is required to make a finding that the documents conform to law. For example, the objects and purposes set forth in proposed articles of incorporation must be those that are permitted by law. Proposed corporate charters presented by corporation practitioners frequently are long, technical, and broad in scope and perhaps even objectionable as to words and phrases.

The Superintendent must make a determination whether the proposed articles come within the provisions of the act. The Superintendent must determine whether a proposed corporation will engage in a business which is not permitted under the statute. He must determine whether a proposed corporate name is available for use. This requires a review of thousands of names already in use and a determination as to whether the proposed name is the same as or deceptively similar to any name or names already in use. In many instances this may be a difficult legal question.

The Superintendent must make determinations as to whether the provisions of articles of incorporation with respect to authorized shares of capital stock are such as are permitted by the act. Section 13 and 14 deal with the division of authorized shares into classes or designations (voting powers, relative rights, limitations, and restrictions). These provisions are technical in nature and designed to protect the rights of shareholders. To ascertain if such capital stock provisions as submitted by applicants conform to law presents many difficult legal questions.

Section 47(i) of the act permits articles of incorporation to contain provisions for the regulation of the internal affairs of the corporation provided such provisions are "not inconsistent with law." Consequently regulatory provisions must be carefully checked against law to determine whether they are inconsistent with law. Additionally, the Superintendent must determine whether proposed articles of incorporation are properly executed.

Similar questions arise in connection with the examination of the proposed articles of merger, articles of amendment, articles of reduction in stated capital, statements of redemptions and cancellation of shares, articles of dissolution, articles for certificates of authority for foreign corporations, and so forth. A review of any of these documents presents questions requiring the interpretation and application of applicable provisions of the act. One of the most difficult questions which the Superintendent of Corporations is frequently called upon to solve is whether foreign corporations are "transacting business" in the District of Columbia, since if they are, they must secure a certificate of authority. Consequently, he is sometimes called upon to make investigations, gather facts, and reach a legal conclusion as to whether activities conducted by the corporation constitute "transacting business." This is a most difficult question of law and in many jurisdictions there are numerous decisions on that vexing problem. Similarly, in connection with the proposed revocation of certificates of authority of foreign corporations, the Superintendent must judicially weigh evidence and determine whether the certificate was procured through fraud or misrepresentation and he must make findings regarding those questions. Obviously these require of the Superintendent semijudicial proceedings. In short, much more is required by the corporation laws than a mere routine checking of the manner of execution of a document and a computation of the correct amount of filing fees. In short, the corporation statutes are not self-operative. The administration of the acts requires legal training, legal analysis, independent judgment-none of which are required under the statute provising for a Recorder of Deeds.

The Recorder of Deeds of the District of Columbia is not required to be a lawyer (see District of Columbia Code 45-701), and is generally recognized as a ministerial officer. The powers of a ministerial officer are normally very strictly construed and do not include discretionary powers unless they are expressly created by the legislature. In light of the legislative history of the District of Columbia Business Corporation Act, and the contents of section 45-701, which enumerates the functions of the Recorder of Deeds, all of which are ministerial, the present arrangement by which an administrator functions subject to control of a ministerial officer raises additional serious legal questions.

Since the Recorder of Deeds occupies supervisory capacity over the Superintendent of Corporations, that position necessarily includes the power of review and appeal if the Recorder wishes to exercise it. Since the Recorder need not be a lawyer, he would then be in a position to reverse or modify decisions of the Superintendent of Corporations which are necessarily of a legal nature.10 Such action could create confusion and cause havoc in the administration of the corporation laws of the District. That possibility must be avoided.

It is worth noting that in most States of the Union, the corporation laws are administered by State officials of high rank and standing. For example, in many States the corporation department is in the office of the secretary of state. We in the bar association know of no State in the Union where the State corporation department is under the supervision or control of an officer equivalent to a county recorder of deeds.

OBJECTIONS OF DISTRICT OF COLUMBIA COMMISSIONERS

When H.R. 12372, the predecessor to this bill, was introduced at the 2d session of the 88th Congress on August 13, 1964, the Commissioners of the District of Columbia wrote a letter to the Honorable John L. McMillan on September 22, 1964, objecting to it. In particular, they questioned the desirability of specifying in permanent legislation details relating to the functioning of a corporation department, the creation of an official seal, and the authorization for making regulations by an officer of the District of Columbia other than a Commissioner. Accordingly, that bill was redrawn, and now H. R. 7173, as redrawn, meets those

7 See Youngblood v. United States (141 F. 2d 912, 913, Sixth Circuit, 1944); Dancy v. Clark (24 App. D.C. 47, 1905, 76 C.J.S., Register of Deeds, sec. 2).

* Youngblood v. United States (141 F. 2d 912, 913, Sixth Circuit, 1944)..

See Am. Jur., Public Admin. Law sec. 183; cf., Fleitman v. Burnet (62 App. 83, 65 F. 2d 136, 1933); Christopher v. Commissioner (60 App. D.C. 368, 55 F. 2d 530 (1935)).

10 When special qualifications are required by legislative intent, a delegation to an officer who necessarily does not have them may be invalid. See 1 Sutherland, Statutory Construction, sec. 312 (1943).

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