Lewis v. Jacksonville Build. & Loan Ass'n

• Decision Date: 21 July 1976
• Docket Number: No. B--5814,B--5814
• Parties: W. Sale LEWIS, Savings and Loan Commissioner, et al., Petitioners, v. JACKSONVILLE BUILDING AND LOAN ASSOCIATION, et al., Respondents.
• Court: Texas Supreme Court

Page 307

540 S.W.2d 307

W. Sale LEWIS, Savings and Loan Commissioner, et al., Petitioners, v. JACKSONVILLE BUILDING AND LOAN ASSOCIATION, et al., Respondents.

No. B--5814.

Supreme Court of Texas.

July 21, 1976.

Rehearing Denied Sept. 29, 1976.

John L. Hill, Atty. Gen., Thomas M. Pollan, Asst. Atty. Gen., Larry E. Temple, and George E. Ramsey, III, Austin, for petitioners.

Heath, Davis & McCalla, Dudley D. McCalla, Austin, for respondents.

DENTON, Justice.

This is a suit by Jacksonville Building and Loan Association and Rusk Federal Savings and Loan Association, the respondents here, to set aside the order of the Savings and Loan Commissioner approving and granting the charter application of the Cherokee Savings and Loan Association to be operated in Jacksonville, Texas. The trial court upheld the Commissioner's order. The court of civil appeals, by a majority opinion, reversed and rendered judgment setting aside the Commissioner's order. 531 S.W.2d 433. We reverse the judgment of the Court of civil Appeals and affirm the judgment of the trial court.

The respondents contend here, as in the court of civil appeals, that the order granting the charter application was invalid on three grounds: (1) the order was not supported by substantial evidence; (2) the order did not contain concise and explicit statement of the findings in the order as required by Article 852a, § 11.11(4) Vernon's Texas Civil Statutes Annotated; and (3) the Commissioner failed to render his decision within the 45 days period required by the rules and regulations. The court of civil appeals sustained respondent's third contention, but did not rule on the contention that the order was not supported by substantial evidence or that the order did not meet the requirements of § 11.11(4) of the Texas Savings and Loan Act.

The initial question is whether or not the requirement of Rule 1.9 of the Rules and Regulations for Savings and Loan Associations specifying a decision on pending applications within 45 calendar days after the date the hearing is finally closed, is mandatory and the failure to act in that period of time invalidates the Commissioner's order. The facts material to this issue are uncontested. Application was made by a group of local citizens to the Savings and Loan Commissioner for a charter for a new Savings and Loan Association to be located in Jacksonville, Texas, under the name of Cherokee Savings and Loan Association. Shortly thereafter, Tyler Savings and Loan Association made application for a branch office to be located in Jacksonville. The respondents here opposed both applications. The Savings and Loan Commissioner consolidated the two applications for hearing. A full hearing on both applications was held on August 6 and 7, 1974. By letter of October 10, 1974, 64 days after the hearing closed, the Commissioner announced his decision to approve the charter application and deny the branch application. The order approving the charter application for Petitioner Cherokee Savings and Loan Association was issued November 18, 1974, 103 days after the hearing closed.

Rule 1.9 of the Rules and Regulations for Savings and Loan Associations reads as follows:

1.9 The Commissioner Shall render his decision within forty-five (45) calendar days after the date the hearing is finally closed if the hearing was held in accordance with Section 1.3 above, or after the date on which the hearing is dispensed with, as the case may be provided, however in cases of conflicting applications meeting the requirements of Section 2.14 of the Texas Savings and Loan Act, where one or more subsequent applications are filed before the first application is heard, the Commissioner may delay his decision on all such competing applications until forty-five (45) days after the last such application has been heard. (emphasis ours)

Article 342--114, Vernon's Texas Civil Statutes Annotated authorizes the Savings and Loan Section of the Finance Commission to promulgate general rules and regulations not inconsistent with the Constitution and statutes of this State. The question is one of construction of the administrative rule. Valid rules and regulations promulgated by an administrative agency acting within its statutory authority have the force and effect of legislation. Texarkana and Ft. S. Ry. Co. v. Houston Gas & Fuel Co., 121 Tex. 594, 51 S.W.2d 284 (1932); Northeast Tarrant County Water Authority v. Board of Water Engineers, 367 S.W.2d 720 (Tex.Civ.App., 1963, no writ). Administrative rules are ordinarily construed like statutes.

There is no absolute test by which it may be determined whether an administrative rule or regulation is mandatory or directory. The prime object is to ascertain and give effect to the intent of the rule or regulation. Although the word 'shall' is generally construed to be mandatory, it may be and frequently is held to be directory. In determining whether the administrative agency intended the provision to be mandatory or directory, consideration should be given to the entire rule, its nature, objects and the consequences which would result from construing it each way. Provisions which do not go to the essence of the act to be performed, but which are for the purpose of promoting the proper, orderly, and prompt conduct of business, are not ordinarily regarded as mandatory. If the provision directed doing of a thing in a certain time without any negative words restraining it afterwards, the provision as to time is usually directory. See Chisholm v. Bewley Mills, 155 Tex. 400, 287 S.W.2d 943 (1956); Thomas v. Groebl, 147 Tex. 70, 212 S.W.2d 625 (1948); Markowski v. Newman, 134 Tex. 440, 136 S.W.2d 808 (1940); Federal Crude Oil Company v. Yount-Lee Oil Company, 122 Tex. 21, 52 S.W.2d 56, 61; Sutherland, Statutory Construction 3rd Ed., Vol. 3, p. 95, Sec. 5813 et seq., 82 C.J.S. Statutes § 376 et seq., p. 869.

The court of civil appeals based its ruling upon Bay City Federal Savings & Loan Association v. Lewis, 474 S.W.2d 459 (Tex.1971). There this Court interpreted the requirements of Article 852a § 11.11(4) Vernon's Texas Annotated Civil Statutes, that the findings of fact in the Commissioner's order if set forth in statutory language shall be accompanied by concise and explicit statement of underlying facts which support the findings. After reviewing the order, which approved a charter application for Savings and Loan Association, we hold that the order was invalid where the Commissioner failed to set forth precise and explicit statements of underlying facts supporting the findings that the statutory requirements had been complied with. This statutory mandate requiring recitation of underlying facts in support of statutory findings in Bay City was clearly a requirement of substantive law. The reliance by the majority of the court of civil appeals on Bay City is misplaced.

There are numerous cases in other jurisdictions that have passed upon this question. In Muskego-Norway Consolidated Schools Joint School District v. Wisconsin Employment Relations Board, 32 Wis.2d 478, 151 N.W.2d 84 (1967), the court held that a statute requiring the State Employment Relations Board to file its findings and decision within 60 days after the closing of a hearing was held to be directory and not mandatory. In Carrigan v. Illinois Liquor Control Commission, 19 Ill.2d 230, 166 N.E.2d 574 (1960), the Illinois Supreme Court was considering certain provisions of the Liquor Control Act. The court held that under a statute providing that within 20 days after service of any order or decision of the Liquor Control Commission upon any party to a proceeding, such party may apply for a rehearing and the commission shall receive and consider such application for rehearing within 20 days from the filing thereof. The court held that that portion of the statute concerning rehearing within 20 days is merely directory, and failure of the commission to pass upon the application for rehearing within 20 days did not deprive the commission of jurisdiction. In Huffman v. Kite, 198 Va. 196, 93 S.E.2d 328 (1956), the court held that the language of a statute providing that appointments to School Trustee Electoral Board are to be made by the Circuit Court or judge within 30 days of July 1, 1950, and every four years thereafter and that vacancies shall be filled within 30 days, is not mandatory but only directory, notwithstanding use of 'shall', and the fact that the court failed to make the appointment within 30 days of July 1, 1954. For similar holdings see Koehn v. State Board of Equalization, Department of Alcoholic Beverage Control, 166 Cal.App.2d 109, 333 P.2d 125 (1958); Village of...