Lawson v. Baker

• Decision Date: 25 February 1920
• Docket Number: (No. 6239.)
• Citation: 220 S.W. 260
• Parties: LAWSON v. BAKER, State Treasurer, et al.
• Court: Texas Court of Appeals

220 S.W. 260

LAWSON v. BAKER, State Treasurer, et al.

(No. 6239.)

Court of Civil Appeals of Texas. Austin.

February 25, 1920.

Rehearing Denied March 31, 1920.

Appeal from District Court, Travis County; Ireland Graves, Judge.

Suit by H. S. Lawson against John W. Baker, State Treasurer, and others. From judgment denying temporary injunction, plaintiff appeals. Affirmed.

McGregor, Burr & Lewis, of Houston, for appellant.

C. M. Cureton, Atty. Gen., and Jno. Maxwell and C. W. Taylor, Asst. Attys. Gen., for appellees.

BRADY, J.

Appellant brought this suit to test the constitutionality of chapter 145, Acts of the regular session of the Thirty-Sixth Legislature, and known as the "State Depository Law." The action seeks to restrain the State Treasurer, the Attorney General, and the Commissioner of Insurance and Banking, in their respective official capacities, and as members of the Depository Board, from enforcing and carrying out the provisions of such act.

It is claimed that the act is repugnant to the Fourteenth Amendment to the Constitution of the United States, and of the following provisions of the state Constitution: Section 6 of article 8, section 7 of article 8, section 51 of article 3, section 4 of article 7, section 5 of article 7, section 9 of article 7, and section 11 of article 7.

The pertinent part of section 6, article 8, reads as follows:

"No money shall be drawn from the treasury, but in pursuance of specific appropriations made by law."

Section 7 of the same article provides:

"The Legislature shall not have power to borrow, or in any manner divert from its purpose, any special fund that may or ought to come into the treasury; and shall make it penal for any person or persons to borrow, withhold or in any manner to divert from its purpose, any special fund, or any part thereof."

The other constitutional provisions invoked in the verified petition, relate to various special funds, created or defined in the Constitution, and the substance only of same will be stated.

Section 51, article 3, prohibits the Legislature from making any grant, or authorizing the making of any grant of public money to any individual, association of individuals, municipal or other corporation, whatsoever; and by an amendment, adopted November 5, 1912, authorized the Legislature to levy and collect a specific tax, for the purpose of creating a special fund for the payment of pensions to Confederate veterans and their widows.

Section 4, article 7, provides for the investment by the comptroller, under the direction of the board of education, of the proceeds of lands thertofore set apart to the public free school fund. The investment is required to be in bonds of the United States, the state of Texas, or counties of the state, or in similar securities, and under such restrictions as may be prescribed by law, and the state is made responsible for all investments.

Section 5 of the same article provides that the principal of bonds and other funds, and the principal arising from the sale of lands set apart to the school fund shall be the permanent school fund; and the interest derivable therefrom and from taxes levied shall be the available fund. It is specifically provided that no law shall ever be enacted, appropriating any part of the permanent or available school fund to any other purpose whatsoever.

Section 9, article 7, provides and sets apart certain lands and donations as the permanent fund for the support and maintenance of the state asylums. The Legislature is limited, in its power of investment of proceeds of these lands, to the same manner as provided for the investment of school lands in section 4.

Section 11 provides for the permanent university fund, and specifically prescribes that the funds as realized and received into the treasury shall be invested in bonds of the state of Texas, if obtainable, and, if not, in United States bonds, and the interest accruing thereon shall be subject to legislative appropriation for the maintenance and support of the university.

As to each of the special funds mentioned, it is claimed in the petition that the act in question authorized and directed the diversion of such funds from their constitutional purpose, by the depositing of such funds in banks selected as state depositories; and it is especially insisted that the interest earned upon such funds becomes in law a part of the funds, and may not be lawfully diverted by the Legislature to any other fund, or to any other than the constitutionally declared purpose. The act provides that the interest on all funds accruing from the deposit in banks shall become a part of the general revenue.

The statement of the grounds and facts upon which appellant, in his capacity as a citizen and taxpayer, relies to sustain his right to maintain this suit will be reserved for a discussion of that question in the opinion.

The respondents answered by general demurrer and special exception to a portion of the petition, and also by general denial.

The trial court rendered judgment, denying the application for temporary injunction, from which order this appeal was taken. It is recited in the judgment that the hearing was had upon the pleadings and argument of counsel, and it appears that no evidence was introduced.

In order to a better understanding of the questions involved upon this appeal, the substance of the pertinent provisions of the statute will be stated.

The act constitutes the three state officers named as the depository board, and makes the state treasurer the secretary. The depositories are selected through bids, and the banks are required to stipulate in their bids that the books and accounts of each institution, designated as a state depository, shall be open at all times to the inspection of the board, or any member thereof. No bids providing for less than 3 per cent. interest on average daily balance of state funds may be considered. To secure the deposits, in addition to the security afforded by the banking laws, state and federal, a bank qualifying as a depository is required to deposit with the state treasurer, in an amount one-fifth greater than the amount of state funds the bank proposes to keep, United States or other bonds, or other commercial securities, or shall execute a surety bond in amount not less than double the funds deposited in such bank, but a surety bond may be rejected by the board in its discretion.

Article 2425, in part, provides that —

"After the depositories have qualified as provided in the preceding articles, it shall be the duty of the state treasurer to deposit the funds belonging to the state in such depositories."

It is also therein provided that the funds shall be so kept in the banks as that the state shall receive the highest rate of interest possible, and that no depository shall be entitled to keep on deposit an amount more than its paid-up capital stock and permanent surplus. There is a proviso that the treasurer may retain in the state treasury from time to time, with the express consent of the board, sufficient funds to meet the current demands on the treasury.

Provision is made for the custody of the securities deposited with the state treasurer, and the treasurer is given power, in case a depository fails to pay deposits, or any part thereof, on his check, to forthwith convert the bonds into money, and to disburse the same, upon warrants drawn by the comptroller, upon the funds for which the bonds are secured.

By article 2427 banks are required to pay the interest monthly, "which interest shall become part of the general revenue." The board has power to designate certain depositories as receiving depositories.

Article 2431 provides that:

"All state funds shall be deposited and kept in state depositories designated under this chapter, subject to the regulations of this chapter; provided that the state treasurer may with the consent of the Depository Board retain in the state treasury at Austin sufficient funds to meet the current expenses of the government in case he finds it advisable to do so."

All state depositories are required to collect, without cost to the state, all checks, drafts, and demands for money, and are required to issue to the state treasurer a draft or exchange for any sum on deposit by the state, not exceeding the amount of the state's deposit in such depository; but it is provided that the treasurer shall give the depository 10 days' notice of his intention to withdraw the funds before drawing more than one-fifth of the amount the depository is entitled to keep. This limitation, however, does not apply to deposits made during the preceding 30 days.

The board is authorized to make rules and regulations governing the establishment, conduct, and handling of funds by state depositories as the public interest may require, not inconsistent with the provisions of the act.

The act also provides for the selection of additional depositories for the purpose of clearing the state's business. It repeals all laws or parts of laws in conflict, and contains an emergency clause.

Opinion.

The case has been admirably briefed and argued, and we acknowledge our obligation to counsel for the abundant citation of authority, which has aided us materially in determining the important and difficult questions at issue. We shall not be able, within the compass of an opinion of reasonable length, to review any great number of these authorities, but they have all been read and considered.

The first question for our consideration is the claim of the respondents that appellant is not authorized, as a taxpayer or citizen, to maintain this action. The contention specifically is that appellant has not shown any injury to himself, either existing or threatened, which gives him any standing in a court of equity to restrain respondents from proceeding under and acting in virtue of the act, the constitutionality of which has been drawn in question.

In behalf of appellant,...