Falkner v. Allied Finance Co. of Bay City

• Decision Date: 21 July 1965
• Docket Number: No. 11326,11326
• Citation: 394 S.W.2d 208
• Parties: J. M. FALKNER, Commissioner of Banking of Texas et al., Appellants, v. ALLIED FINANCE COMPANY OF BAY CITY et al., Appellees.
• Court: Texas Court of Appeals

Page 208

394 S.W.2d 208

J. M. FALKNER, Commissioner of Banking of Texas et al., Appellants, v. ALLIED FINANCE COMPANY OF BAY CITY et al., Appellees.

No. 11326.

Court of Civil Appeals of Texas, Austin.

July 21, 1965.

Rehearing Denied Oct. 6, 1965.

Waggoner Carr, Atty. Gen., Hawthorne Phillips, First Asst. Atty. Gen., Stanton Stone, T. B. Wright, Executive Asst. Attys. Gen., Paul Phy, Joe R. Long, Ralph R. Rash, Asst. Attys. Gen., Austin, Locke, Purnell, Boren, Laney & Neely, J. L. Shoook, John D. Crawford, Dallas, for appellants.

Locke, Purnell, Boren, Laney & Neely, J. L. Shook, John D. Crawford, Dallas, for appellees and cross-appellants.

HUGHES, Justice.

Allied Finance Company of Bay City and forty-three other Allied Finance Companies, all Texas Corporations, sued J. M. Falkner, Commissioner of Banking of Texas, H. L. Bengtson, Deputy Commissioner of Banking, R. S. Calvert, Comptroller of Public Accounts of Texas, Jesse James and Waggoner Carr, Treasurer and Attorney General of Texas, respectively, in their official capacities, for injunctive relief and a declaratory judgment based on their primary contention that they are not subject to supervision or regulation under Art. 1524a, Vernon's Ann.Tex.Civ.St.

To this petition the officials sued filed a plea in abatement to the effect that no cause of action was alleged against them and that it constituted a suit against the State filed without legislative permission. These same officials filed an answer consisting principally of a general denial and a cross-action on behalf of the State against all corporations bringing the suit alleging that they were all Texas Corporations and subject to the provisions of Art. 1524a, V.T.C.S. and that they had not paid the filing fees required by Section 4 of such Article. The State asked judgment for these fees and for penalties as therein provided.

Trial was nonjury and resulted in a judgment in behalf of all Allied Corporations bringing suit for the relief sought except the four Allied Finance Corporations (Baton Rouge, LaFayette, Lake Charles, Shreveport) who were not licensees under Art. 6165b, Texas Regulatory Loan Act. As to these corporations, injunctive relief was denied and judgment was rendered against each of them for $200.00 for failure to file statement of condition and pay the statutory filing fee on or before April 1, 1964, as required by Sec. 4, Art. 1524a.

This judgment also dismissed from the suit all officials sued except the Commissioner and Deputy Commissioner of Banking.

Appeals from this judgment have been perfected by the four Allied Corporations against whom judgments were redered and the two Banking Commissioners on behalf of the State.

The material facts are undisputed.

All of the Allied Corporations, except Bryan, Fairmount, Temple and Arlington, were organized on August 7, 1963. Bryan was organized November 20, 1963, Fairmount and Temple December 17, 1963, and Arlington on January 14, 1964. ¹

All Allied Corporations except the four Louisiana named Corporations are licensed under the Regulatory Loan Act.

All forty-four Allied Corporations have identical purpose clauses in their charters. This purpose clause is as follows:

'ARTICLE THREE

The purposes for which the corporation is organized are:

To obtain one or more licenses and operate under The Texas Regulatory Loan Act, Chapter 205, Acts 1963, 58th Legislature, Vernon's Ann.Civ.Stats. Art. 6165b;

To accumulate and lend money without banking or discounting privileges;

To purchase, sell and deal in notes, bonds and securities;

To subscribe for, purchase, invest in, hold, own, assign, pledge and otherwise deal in and dispose of shares of capital stocks, bonds, mortgages, debentures, notes and other securities or obligations, contracts and evidences of indebtedness of foreign or domestic corporations;

To borrow money or issue notes, bonds, debentures and commercial paper for carrying out any or all purposes above enumerated;

To purchase, hold or sell installment obligations and contracts of every kind;

To obtain licenses and permits where appropriate and permitted by law to carry on any and all of such purposes; and

To do such things as may be necessary or convenient in carrying out any and all of the foregoing purposes.'

Art. 1524a was last amended in 1959. We quote the following portions of Sections 1, 2, 4, 5 and 7 of such Article which indicate its purport and scope:

'Art. 1524a. Corporations for loaning money and dealing in bonds and securities without banking and discounting privileges; regulations

Application; acting as agent; capital

Sec. 1. This Act shall embrace corporations heretofore created and hereafter created having for their purpose or purposes any or all of the powers now authorized in Subdivisions 48, 49 or 50 of Article 1302, Revised Civil Statutes of Texas, 1925, and heretofore or hereafter created having in whole or in part any purpose or purposes now authorized in Chapter 275, Senate Bill Number 232 of the General and Special Laws of the Regular Session of the 40th Legislature.

Sec. 2. The Banking Commissioner of Texas shall examine or cause to be examined such corporations annually or oftener if he deems it necessary. Said corporation shall pay the actual traveling expenses, hotel bills, and all other actual expense incident to such examination and a fee not exceeding Twenty-five Dollars ($25) per day per person engaged in such examination. If such corporation had not sold in Texas its bonds, notes, certificates, debentures, or other obligations and does not offer for sale or sell in Texas its bonds, notes, certificates, debentures, or other obligations, the Banking Commissioner of Texas, in lieu of an examination, shall accept a financial statement made on such form and containing such information as he desires.

Sec. 4. Such corporation that has sold in Texas its bonds, notes, certificates, debentures or other obligations, or is offering for sale in Texas its bonds, notes, certificates, debentures or other obligations, shall publish in some newspaper of general circulation in the county where it has its principal place of business, on or before the 1st day of February each year, a statement of its condition on the previous 31st day of December, in such form as may be required by the Banking Commissioner of Texas, showing under oath its assets and liabilities, and shall file a copy of such statement with the Banking Commissioner of Texas together with a fee of Twenty-five ($25.00) Dollars for filing.

Such corporation that has not sold in Texas its bonds, notes, certificates, debentures or other obligations, and does not offer for sale or sell in Texas its bonds, notes, certificates, debentures or other obligations, shall file with the Banking Commissioner of Texas on or before the 1st day of February of each year a statement of its condition on the previous 31st day of December, in such form as may be required by the Banking Commissioner of Texas, showing under oath its assets and liabilities, together with a fee of Twenty-five ($25.00) Dollars for filing; which report, when so filed, shall not be open to the public but shall be for the information of the Banking Commissioner and his employees.

Sec. 5. If any such corporation shall fail to comply with Section 4 of this Act in the manner and within the time required, such failure shall subject such corporation to a penalty of not less than Two Hundred ($200.00) Dollars nor more than One Thousand ($1,000.00) Dollars, which shall be collected at the suit of the Attorney General if not paid within thirty (30) days February first of each year.

Sec. 7. All bonds, notes, certificates, debentures, or other obligations sold in Texas by any corporation affected by a provision of this Act shall be secured by securities of the reasonable market value, equaling at least at all times the face value of such bonds, notes, certificates, debentures, or other obligations. If such corporation sells in Texas, bonds, notes, certificates, debentures, or other obligations upon which it receives installment payments, such bonds, notes, certificates, debentures and other obligations shall be secured at all times by securities having the reasonable market value equal to the withdrawal or cancellation value of such obligations outstanding. Said securities shall be placed in the hands of a corporation having trust powers approved by the Banking Commissioner of Texas as Trustee under a trust agreement, the terms of which shall be approved in writing by the Banking Commissioner of Texas, or at the option of any such corporation which sells in Texas, bonds, notes, certificates, debentures, or other obligations upon which it receives installment payments, such corporation may upon application to, and approval by, the Banking Commissioner of Texas deposit securities having a reasonable market value equal to the withdrawal or cancellation value of such obligations outstanding with the State Treasurer of Texas in lieu of such deposits with a Trustee as set forth hereinabove, provided that, in the event such deposit is made with the State Treasurer of Texas in lieu of such Trustee: (1) Such corporation shall file a certified statement of reserve liability and detailed list of securities so deposited, semiannually with the Banking Commissioner of Texas, which certification shall be made by a Certified Public Accountant, who shall be approved by and be satisfactory to the Banking Commissioner. The Corporation shall pay a fee of Fifteen Dollars ($15) for filing each such statement. (2) Said securities shall be deposited with the State Treasurer under a trust agreement, the terms of which shall be approved by the Banking Commissioner.'

Article 1302, V.A.C.S., stating the purposes for which private corporations might be formed, at the time of the enactment of Article 1524a, read in part as follows:

'48. To accumulate and lend money without banking or discounting privileges.

49. For any one or...