Security State Bank v. State

• Decision Date: 17 February 1943
• Docket Number: No. 9313.,9313.
• Citation: 169 S.W.2d 554
• Parties: SECURITY STATE BANK OF SAN JUAN v. STATE.
• Court: Texas Court of Appeals

169 S.W.2d 554

SECURITY STATE BANK OF SAN JUAN v. STATE.

No. 9313.

Court of Civil Appeals of Texas. Austin.

February 17, 1943.

Rehearing Denied March 10, 1943.

Appeal from District Court, 98th Judicial District, Travis County; J. D. Moore, Judge.

Suit by the State of Texas against Security State Bank of San Juan to enjoin the defendant in voluntary liquidation from reopening and to compel its further liquidation. From a judgment for plaintiff, the defendant appeals.

Judgment affirmed.

J. J. Biffle and Claude Pollard, both of Austin, for appellant.

Gerald C. Mann, Atty. Gen., and Geo. W. Barcus, Fagan Dickson, and Ocie Speer, Asst. Attys. Gen., for appellee.

McCLENDON, Chief Justice.

Suit by the State to enjoin the Bank (Security State Bank of San Juan) in voluntary liquidation from reopening, and to compel its further liquidation. In a trial to the court the judgment was for the State and the Bank has appealed.

The question presented by the appeal which we regard as paramount is: whether a solvent state bank, that has gone into voluntary liquidation under the provisions of Art. 539, R.C.S., has the right thereafter to resume the banking business without the approval or consent of the Board (State Banking Board).

We believe a chronological statement of the salient facts would best facilitate a clear presentation of the issue involved.

San Juan, a city of 2,264 population (figures herein are of the 1940 census), is in the south central portion of Hidalgo county, in the citrus fruit section of the Rio Grande Valley. It was one of eight closely situated cities in Hidalgo county, on U. S. Highway 83 (from Laredo to Brownsville), located from west to east with population and distances apart as follows: Mission (5,982) six miles from McAllen (11,877) three miles from Pharr (4,784) two miles from San Juan (2,264) two miles from Alamo (1,944) four miles from Donna (4,712) four miles from Weslaco (6,883) five miles from Mercedes (7,624). At Pharr Highway 83 joins Highway 281, extending north to San Antonio and other points. Edinburg (8,718), the county seat, is eight miles north of Pharr on Highway 281. There was a bank at Alamo but none at Pharr; as to the banking situation in the other cities except San Juan the record is silent. The bank was organized in 1920 and had continuously operated as a solvent bank up to March 10, 1941, when it went into voluntary liquidation under circumstances following:

In the summer of 1940 Stone, president of the Bank, consulted McMillan, Deputy Banking Commissioner, with reference to moving the bank from San Juan to Pharr and was advised that this could not be done by amendment to the charter but only by surrendering the charter and obtaining a charter for a bank at Pharr. August 3, 1940, Stone, as president of the Bank, wrote the Attorney General:

"There is pending with Hon. Lee Brady, Banking Commissioner of Texas, an application for a charter for a state bank at Pharr, Texas, which application should soon come before the State Banking Board.

"The proposed bank will be known as Security State Bank of Pharr, Texas, with a capital structure of $60,000.00 and it is the plan of the stockholders and officers of Security State Bank of San Juan, Texas, to liquidate the bank at San Juan, at the earliest practical date, which will eliminate increasing the number of banks in this vicinity. I shall appreciate your giving this application every consideration and upon final consideration granting the charter."

Shortly thereafter Stone conferred with Brady, then Banking Commissioner, who testified:

"He (Stone) said if we would give him a charter at Pharr that he would put into liquidation the bank at San Juan, and the charter was granted on those grounds, and the charter was delivered by Mr. Faulkner, the Departmental Examiner, with definite instructions not to open the new bank except the old one went into liquidation. That was done on March 10th, the new one opened, and the old one went into liquidation on that date.

"Q. Why was that made a consideration? A. Well, from the banker's standpoint — from the Board's standpoint — there wasn't room in the two towns there for two banks. The Board felt, and I felt individually, that one bank could serve the two communities. There is exactly one mile distance between the two banks, from city limit to city limit; there is a mile and a half from bank building to bank building."

He added: "In about thirty days, or less than sixty days after the Pharr bank was opened, I had an application — that is, a formal application, or informal application, from the San Juan citizens to open the bank at San Juan, and I told them I would not recommend it."

The Board granted the application for the Pharr bank charter, which, together with certificate of authority to do business, Art. 382, was delivered by a banking examiner on March 10, 1941, and the Pharr bank was opened for business with Stone as president. Simultaneously the San Juan bank went into voluntary liquidation. Some time later (date not shown) Stone sold his interest in the Pharr bank. September 8, 1941 (just two days before expiration of the six months' period when, under Art. 540, the directors were required to deposit with the State Treasurer the amount of all then unpaid deposits and liabilities), the stockholders unanimously passed a resolution to reopen the Bank. Then followed a number of communications between Stone and banking department officials, in which the latter took the position that the Bank had not the right to reopen. Stone then got the Speaker of the House of Representatives to write a letter to the Attorney General asking for an opinion upon three abstract questions. The letter is not in the record but the questions are copied in the Attorney General's opinion, dated October 18, 1941, and read:

"1. Can a State Bank which is in the hands of the Commissioner for liquidation either voluntarily or otherwise be reopened for business and under what procedure?

"2. Can a State Bank placed in voluntary liquidation by the Board of Directors be reopened and resume business, and if so by what procedure?

"3. Can a State Bank change its domicile from one town to another in this State and by what procedure?"

After answering question 1 (not here pertinent) the opinion reads: "If your question No. 2, however, contemplates a voluntary liquidation by the Board itself of a solvent bank, which has in nowise come into the hands of the Commissioner for liquidation, our answer to that question would be that such solvent bank, even though in the process of self-liquidation, may nevertheless resume its normal banking functions so long as it is solvent. In such a case it would be wise for the Board before resuming business to obtain from the Banking Commissioner his approval, that is to say, making sure that no grounds exist which would justify the Commissioner in taking summary charge of the bank, under Article 369 of the statutes."

After some further negotiations in which the Bank took the position that it had the legal right, under the Attorney General's opinion, to reopen, the Board, on December 3, 1941, passed the following resolution:

"A call meeting of the State Banking Board was held today at 3 o'clock P.M., in the office of the Attorney General, there being present: Gerald C. Mann, Attorney General and Chairman of the Board, John Q. McAdams, Banking Commissioner of Texas, Secretary of the Board, and Jesse James, State Treasurer of Texas, Member. The purpose of the meeting being to discuss and consider the proposed reopening of the Security State Bank of San Juan, Texas, now in liquidation. Said bank having placed itself in voluntary liquidation pursuant to the Board's suggestion, and as a condition precedent to the granting of a charter to the Security State Bank at Pharr, Texas. The applicants for the Pharr Bank charter and the stockholders thereof, having been the same persons operating the San Juan Bank, voted to dissolve the Security State Bank of San Juan, and which dissolution was certified to the Banking Commissioner simultaneously with the delivery of the charter of the Security State Bank of Pharr, Texas, March 10, 1941, on which date the Pharr Bank opened for business; and,

"Whereas, this Board has been advised that the stockholders and directors of the Security State Bank of San Juan, in liquidation, have determined to reopen said bank without obtaining the approval of the Board or the State Banking Commissioner; and,

"Whereas, the Board is of the opinion that the Security State Bank of San Juan is not entitled to conduct a banking business and the Board should disapprove said Bank;

"It is, therefore, resolved that:

"1. The Security State Bank of San Juan, in liquidation, the officers, directors and stockholders thereof, be notified of the action of this Board with respect to said bank's proposal to resume operation.

"2. Wednesday, December 17, 1941, is hereby designated as the day upon which this Board will hear evidence with respect to all matters affecting the right of the Security State Bank of San Juan to reopen and resume the conduct of a banking business, including the need for a bank in the trade area that would be served by such bank in San Juan, Texas. At such time all persons interested shall be permitted to appear before the Board and be heard upon the subject matter of this resolution.

"The Secretary of this Board is directed to prepare and issue notice of such hearing and shall use his best efforts to get such notice to persons in the trade area surrounding and adjacent to the proposed location of the bank, in order that the Board may be fully advised of the facts and that it may enter its final order herein."

Due notice was given of this hearing which was held on December 17, 1941, and on January 10, 1942, the Board passed the following resolution:

"Whereas, on December 3, 1941, this Board adopted a resolution declaring that in its opinion the...