Wilkenfeld v. State

• Decision Date: 21 June 1945
• Docket Number: No. 11700.,11700.
• Citation: 189 S.W.2d 80
• Parties: WILKENFELD et al. v. STATE et al.
• Court: Texas Court of Appeals

Page 80

189 S.W.2d 80

WILKENFELD et al. v. STATE et al.

No. 11700.

Court of Civil Appeals of Texas. Galveston.

June 21, 1945.

Appeal from District Court, Harris County; Ben F. Wilson, Judge.

Action under article 4646b of Vernon's Annotated Civil Statutes by the State of Texas, through Grover Sellers, Attorney General, and others, against Jesse Wilkenfeld and others, for an injunction restraining defendants from charging and collecting usurious interest and for a receivership. From that part of an interlocutory order, made without notice and upon an ex parte hearing, appointing a receiver to take over business assets of defendants, the defendants appeal.

Order reversed and receivership set aside.

Ladin, Lieberman & Boarnet, William E. Ladin, Seymour Lieberman, and Irvin H. Boarnet, all of Houston, for appellants.

Grover Sellers, Atty. Gen., and Ocie Speer, Harris Toler, Jack Rowland and Robert O. Koch, Asst. Attys. Gen., and A. C. Winborn, Dist. Atty. and Robert R. Casey, Asst. Dist. Atty., both of Houston, for appellees.

MONTIETH, Chief Justice, and CODY, Justice.

This is an appeal from that part of an interlocutory order of the 61st District Court of Harris County, made without notice and upon an ex parte hearing, appointing a receiver to take over the business assets of appellants, defendants in an action brought by the State of Texas through Grover Sellers, Attorney General, and others under Article 4646b, Vernon's Revised Annotated Civil Statutes, for an injunction restraining defendants from charging and collecting usurious interest and for a receivership. The interlocutory order of the court from which this appeal is taken granted the temporary restraining order applied for and also appointed a receiver to take possession of the business assets of defendants. In this appeal no complaint is made of that part of the court's order granting the restraining order or temporary injunction.

The State of Texas in its original petition, a copy of the pertinent parts of which is attached to and made a part of this opinion, alleged that the defendants and each of them resided in Harris County, Texas, and were engaged in the business of habitually lending money upon contracts for the use and detention of which usurious interest had been charged and contracted to be paid by the borrowers; that the business of lending money as it was carried on by the defendants was in violation of constitutional and statutory law and that it constituted a nuisance. It alleged that to permit the defendants to retain the possession of the contracts, notes, agreements and instruments used by the defendants in the conduct of their business would put it in the power of the defendants to continue such unlawful business to the great hurt of the public at large, and that the enforcement of Senate Bill 43, now Article 4646b, authorizing a permanent injunction restraining the unlawful lending of money, would be accomplished more fully and effectively by the appointment of a receiver by the court to take charge of appellants' business assets, with such powers as are reasonably necessary to aid in the enforcement of the court's injunction, in that the defendants might, and the State believed and charged that they would, seek to evade contempt proceedings by transferring, usually pretended only, their business, notes, and accounts to some other real or assumed name or individual and continue such business despite the existence of an injunction against the transfer userer and that the appointment of said receiver was an essential and helpful aid as an incident to the remedy of permanent injunction.

The State's petition was verified by an Assistant Attorney General of the State of Texas. Upon presentation of the application to the district judge an order was made without notice to the defendants, which, in effect, restrained the defendants from carrying on their business and by which the defendants were restrained from transferring in any manner to any person or persons whomsoever, any of the vouchers, books, papers, notes, applications, cards or instruments of whatsoever kind used by the defendants in connection with their business of lending money. At the same time and as part of the order, and without any notice to defendants, a receiver was appointed charged with the duty of taking possession of all the property of the defendants, "such property being all books, papers, vouchers, notes, contracts, applications for loans, cards, statements, collateral or incidental contracts or stipulations or agreements used by the defendants in connection with their business of lending money."

Appellants in their brief make a two-fold attack upon the court's action. They contend (1) that, under the facts alleged, the trial court erred in rendering an interlocutory ex parte order appointing a receiver without notice over the business assets of each of these defendants; and (2) that said Article 4646b is unconstitutional under both the State and Federal Constitutions, and that the trial court erred in rendering its order appointing a receiver.

Since this cause was submitted in this court, the Austin Court of Civil Appeals of Texas, on April 19, 1945, in Walter Watts et al., Appellants, v. Gerald C. Mann et al., Appellees, 187 S.W.2d 917, has held said Article 4646b to be valid and enforceable, as against the same objections presented in that court to the measure as are urged against it by these appellants in this court.

This court not only considers itself bound by that decision, but concurs therein as being correct, and overrules defendants' points attacking the constitutionality of said Act.

Eliminating the question of the constitutionality of said Article 4646b, the controlling question presented in this appeal is whether, under the facts alleged in the State's petition, on which the court's order establishing the receivership was based, the trial Judge abused his official discretion in appointing a receiver to take possession of the business assets of appellants on an ex parte hearing without notice to appellants.

Said Article 4646b of the Vernon's Revised Annotated Civil Statutes of Texas, under which this suit was brought, became effective August 10, 1943. Omitting its formal and inapplicable parts, it reads:

"Section 1. The State of Texas through its Attorney General, or any District or County Attorney, may institute a suit in the District Court to enjoin any person, firm, or corporation or any officer, agent, servant or employee of such person, firm, or corporation who is engaged in the business of habitually loaning money for the use and detention of which usurious interest has been charged against or contracted to be paid by the borrower, from demanding, receiving or by the use of any means attempting to collect from the borrower usurious interest on account of any loan, or from thereafter charging any borrower usurious interest, or contracting for any usurious interest. All persons, firms, or corporations, and their agents, officers, servants and employees similarly engaged in making loans of money as herein defined, who reside in the same county, may be joined in a single suit and no plea of misjoinder of parties defendant shall ever be available to any defendant in such suit.

"Sec. 2. * * *

"By the term `usurious interest' as used in this Act, is meant interest at a rate in excess of ten (10%) per centum per annum.

* * * * * *

"Sec. 3. In any such suit venue shall lie in the county of the residence of a defendant, or in a county where such business of loaning money is being conducted by such defendant."

It will be noted that said Article 4646b expressly provides that the State of Texas, acting through its duly authorized officers, may institute a suit to enjoin (emphasis ours) any person, firm or corporation who is engaged in the business of habitually loaning money for the use of which usurious interest is charged. Under this Act the State of Texas had an effective and speedy remedy which had been expressly provided for actions of this kind which was less drastic than a receivership and which would have permitted the appellants to retain possession of their property.

The right to the appointment of a receivership after notice and a hearing is a separate and distinct matter from the right to an appointment ex parte and without notice. The rules which apply in the two instances are separate and distinct. In the first instance the matter is controlled by Article 2293, R.S.1925, which details the cases and circumstances in which an appointment may be made upon a hearing after notice, while the latter, assuming that a cause of action is alleged, rests in the sound discretion of the court. Corsicana Hotel Co. v. Kell, Tex.Civ.App., 66 S.W. 2d 760.

The appointment of a receiver without notice to the adverse party is one of the most drastic remedies known to the courts and should be exercised only in extreme cases where the rights therefor are clearly shown, and then in the exercise of great caution by the court, Keep 'Em Eating Co. v. Hulings, Tex.Civ.App., 165 S. W.2d 211; 36 Tex.Jur. 108, and cases there cited, and cause therefor must be shown either in a verified bill, petition or complaint or by affidavit, as no other evidence is admissible and facts and circumstances, as distinguished from mere opinions and conclusions, must not only be set forth but they must be alleged and verified positively and not upon information and belief. Zanes et al. v. Lyons, Tex.Civ.App., 36 S.W.2d 544; C. P. Oil Co. v. Shelton, Tex.Civ. App., 48 S.W.2d 509; Corsicana Hotel Co. v. Kell, Tex.Civ.App., 66 S.W.2d 760; 53 Corpus Juris, 59.

The State in this case does not contend that the temporary injunction which it sought and obtained restraining defendants from "demanding, receiving or by the use of any means attempting to collect from any borrower usurious interest on account of any loans" et cetera, and from "transforming in any manner to any...