Falkner v. Southwestern Savings & Loan Ass'n of Houston

GRAY, Justice. Southwestern Savings and Loan Association of Houston, Texas, brought this suit against J. M. Falkner, Banking Commissioner of the State of Texas, and prayed for a declaratory judgment decreeing that it may open branch offices without first obtaining the approval of the Commissioner, and for an injunction restraining the Commissioner from taking any action to prevent it from opening and operating branch offices. By his answer the Commissioner affirmatively claimed statutory authority to require his approval prior to the opening of branch offices, and further alleged the promulgation of rules and regulations requiring the prior approval of the Commissioner for the opening of branch offices of State building and loan associations. At a nonjury trial judgment was rendered denying the declaratory judgment prayed [166] for in part but finding that “there was no prohibition in the statutory provisions, legal restrictions and other laws of the State of Texas against the plaintiff opening a branch office or branch offices * * * without obtaining the prior approval of the Banking Commissioner of the State of Texas;” and holding that “upon the abovemention-ed rules and regulations being adopted the Plaintiff became bound to obtain the prior approval of the State Banking Commissioner before opening any branch office other than the six branch offices mentioned specifically in this judgment” and enjoining the Commissioner from interfering with the opening of six branch offices by Southwestern. Southwestern has appealed-from that part of the trial court’s judgment denying a declaratory judgment and the Commissioner has appealed from that part of the judgment granting injunctive relief and also complains of findings made by the trial court. The facts show that Southwestern is a building and loan association incorporated and existing under the laws of Texas with its office and principal place of business located at 3401 South Main Street, Houston, Texas. It desired to open five branch offices in the City of Houston and one in the adjoining suburb of Bellaire and by letter dated December 30, 1953, and presented to the Commissioner on January 7, 1954, it notified the Commissioner of its intention to open such branch offices and gave their proposed locations. At the time of the trial one of such offices had been opened and commitments for opening the others had been made. ' This suit was filed December 10, 1957 and on January 29, 1958 rules and regulations were promulgated and , adopted requiring the approval of the Commissioner prior to the opening of branch offices of building and loan associations. The rules provided that an application shall be filed for permission to open additional public offices which shall state: “ * * * the need therefor; the functions-to be performed; the personnel and office facilities to be provided ; the estimated annual volume of business, income and expenses of such additional public office; and shall be accompanied by a proposed annual budget of the applying association.” The rule then provides that the application shall be set for hearing, notice given as is provided for new charter applications and further provides that the application ■ shall not be granted unless the Commissioner shall affirmatively find stated requirements. The trial court held that the above rules were valid and binding on Southwestern after their effective date but that because Southwestern had opened or had made substantial commitments for opening the proposed offices prior to January 29, 1958, said rules had'no application to such proposed offices. The judgment was entered July 1, 1958. Southwestern complains that the trial court erred in holding that the Commissioner had authority to promulgate rules requiring building and loan associations to obtain prior approval of the Commissioner before opening public offices other than its home office. Art. 881a, Vernon’s Ann.Civ.St, is applicable to the questions here presented. Sections of that Article are numbered from 1 to 69 both inclusive, and we will refer to the sections which in our opinion control our decision. Sec. 2 provides that when a proposed charter, or articles o.f association, for a building and loan association has been filed if it appears to the satisfaction of the Commissioner that the 'minimum capital required has been paid in cash then he shall determine: “ * * * whether the character, responsibility and general fitness of the persons named in the articles of incorporation are such as to command [167] confidence and warrant belief that the. business of the proposed building and loan association will be honestly and efficiently conducted in accordance with the intent and purpose of this Act, and whether the public convenience and advantage will be promoted by allowing such proposed building and loan association to be incorporated and engaged in business, and whether-the population in the neighborhood of such place and in the surrounding country affords a reasonable promise of adequate support for the ’proposed building and loan association.” The Section then provides that if the Commissioner is satisfied concerning the matters above specified that he shall issue a certificate to the association which shall then become a body corporate and authorized to exercise powers not inconsistent with the provisions “of this Act.” However before engaging in business by-laws must be adopted and approved by the Commissioner and the association must secure a certificate of authority to do business from the Commissioner under Section 4. If the Commissioner is not satisfied “that it is expedient and desirable to permit such proposed building and loan association to engage in business” then under Section 3 he shall refuse the application. Section 7 provides that the Commissioner shall have the supervision over and control of all State building and loan associations and charges him with the execution of the laws of the State relating to such associations. Other sections provide for the making of reports to the Commissioner by associations, examinations of them by him, keeping of books and accounts by them, authorize the Commissioner to cause the correction of illegal, unauthorized, unsafe or fraudulent practices of the association on penalty of the association’s certificate of authority being annulled. Other sections deal with matters not of controlling importance here. The sections above quoted from and referred to clearly show that it was the intent of the Legislature to promote the' public convenience and advantage in authorizing building and loan associations to engage in business in this State and to accomplish and insure this purpose the Commissioner was vested with the powers and the authority set out in the laws relating to these organizations and the conduct of their business. “It is the settled law that the constitutional and statutory laws of this state in force when a corporate charter is granted are parts of such charter, though not expressly incorporated therein.” Shaw v. Lone Star Building & Loan Ass’n, 123 Tex. 373, 71 S.W.2d 863, 867. Southwestern’s charter was approved and its certificate of authority to do business was issued and both were accepted on the conditions named in the statutes. The Commissioner’s action in approving the charter and issuing the certificate of authority was founded, in part at least, on his findings that the public convenience and advantage would be promoted by .allowing Southwestern to engage in business at 3401 South Main Street, Houston, and that the population in that neighborhood and in the surrounding country afforded a reasonable promise of adequate support for it. In-making these findings the Commissioner surveyed the designated location and was not called upon to survey locations not specified but where future public offices may be located. It is quite evident that the Commissioner could not perform the duty of supervising and controlling Southwestern and execute the laws relating to it without being afforded the opportunity to approve or disapprove the place where it conducted business. In Von Rosenberg v. Lovett, Tex.Civ.App., 173 S.W. 508, 514, Er. ref, the Court considered the meaning of a statute which made it the official duty of the board [168] of equalization “to supervise the assessment of their respective counties.” The Court said: “To supervise does not mean to do the work in detail, but to see that it is done. It means to oversee, with power of direction.” In Smithson v. Callahan, 78 U.S.App.D.C. 355, 141 F.2d 13, 14, the Court considered the meaning of “supervision” used in a local court rule requiring the trustee administering an estate under the supervision of the court to file reports, etc. The Court said that supervision “implies a duty in the trustee to ■consult the court before taking action.” When the word “control” is placed in company with “supervision” as it is in Section 7, supra, it appears certain that the Legislature has made it the duty of the Commissioner to exercise “a directing, .restraining .and governing influence over” Southwest-•em, and that the establishment and' operation of branch offices come within such supervision and control. It ⅛ our opinion that the Commissioner’s approval must be obtained by State building and loan associations prior to the opening of additional public offices for the transaction of their business. It is also our opinion that the rules promulgated and above referred to are valid and binding from and after January 29, 1958. These rules do no more than prescribe requirements for securing the Commissioner’s approval for opening additional public offices. Southwestern says that an interpretation of Section 7 such as we have given it would make the section unconstitutional. We do not agree. The powers and privileges accruing to Southwestern are derived from constitutional and statutory provisions. Section 2 of Art. 12 of our Texas Constitution, Vernon’s Ann.St., provides: “General laws shall be enacted providing for the. creation of private corporations, and shall therein provide fully for the adequate protection of the public and of the individual stockholderc.” The Legislature by enacting the provisions of law above mentioned has undertaken to comply with this mandate of our Constitution and in protecting the public and the stockholders has not violated it. Southwestern has not, and we are unable to, place a finger on any provision of the Constitution that has been violated. “When a judge pronounces a law to be contrary to the constitution, he must be able to put his finger upon the provision of that instrument which prohibits the act, or from which the prohibition necessarily arises. We find in the constitution no such language, nor do we find any provision from which such prohibition can be fairly implied.” Harris County v. Stewart, 91 Tex. 133, 41 S.W. 650, 656. The building and loan statute (Art. 852 et seq. Vernon’s Ann.Civ.St.) has been held constitutional. Standard Savings & Loan Ass’n v. Davis, Tex.Civ.App., 85 S.W.2d 333. Er. ref. It is our opinion that the trial court was correct in denying the declaratory judgment prayed for by Southwestern and in decreeing that the promulgated rules supra were valid from and after their date. The holding of the trial court that such rules did not apply to the proposed branch offices is not disturbed. In order to support this holding of the trial court it is necessary to treat the letter above referred to as an application by Southwestern for permission to open public offices. The trial court apparently so treated the letter and we do the same. This however does not relieve Southwestern of the duty of securing the approval of the Commissioner for the opening of such public offices'. It is our further opinion that the trial court erred in granting the injunction complained of by the Commissioner, accordingly it is dissolved. What we have said renders unnecessary a consideration of findings made by the trial [169] court and complained of by the Commissioner. The judgment of the trial court is in part affirmed, in part reversed and the injunction restraining the Commissioner from taking.any action to prevent Southwestern from opening six proposed branch offices is dissolved. Affirmed in part, reversed in part and injunction dissolved. HUGHES, J., not sitting.