Case Name: SOUTHWESTERN SAVINGS AND LOAN ASSOCIATION OF HOUSTON, Texas, Petitioner, v. J. M. FALKNER, Banking Commissioner of Texas, Respondent
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1960-01-13
Citations: 331 S.W.2d 917
Docket Number: No. A7184
Parties: SOUTHWESTERN SAVINGS AND LOAN ASSOCIATION OF HOUSTON, Texas, Petitioner, v. J. M. FALKNER, Banking Commissioner of Texas, Respondent.
Judges: HAMILTON, J., joins in this dissent.
Reporter: South Western Reporter Second Series
Volume: 331
Pages: 917–925

Head Matter:
SOUTHWESTERN SAVINGS AND LOAN ASSOCIATION OF HOUSTON, Texas, Petitioner, v. J. M. FALKNER, Banking Commissioner of Texas, Respondent.
No. A7184.
Supreme Court of Texas.
Jan. 13, 1960.
Rehearing Denied March 2, 1960.
Rex G. Baker, Houston, Powell, Rauhut, McGinnis & Reavley, Austin, Roberts, Bale-ar, Richards, Elledge & Heard, Houston, for petitioner.
Will Wilson, Atty. Gen., C. K. Richards, Asst. Atty. Gen., Thos. Black and John W. Stayton, Austin, for respondent.

Opinion:
CALVERT, Justice.
Suit was instituted by Southwestern Savings and Loan Association of Houston, Texas, hereinafter referred to as petitioner, against J. M. Falkner, Banking Commissioner of the State of Texas, hereinafter referred to as respondent, seeking a declaratory judgment decreeing that petitioner might open branch offices without first obtaining the approval of the Commissioner, and also seeking an injunction restraining the Commissioner from taking any action to prevent the petitioner from opening and operating six branch offices. The trial court denied the prayer for a declaratory judgment, but enjoined the respondent from interfering with the opening of the six branch offices. The Court of Civil Appeals affirmed the holding of the trial court denying the declaratory judgment, but reversed that portion of the judgment granting the injunction and dissolved the injunction. 320 S.W.2d 164.
Petitioner is a building and loan association properly incorporated under the laws of Texas, having its office and principal place of business at 3401 South Main Street, Houston, Texas. In 1954 petitioner notified the Commissioner that it desired to open six branch offices in the Greater Houston area and gave the proposed locations. This has been treated by the lower courts as an application for permission to establish branch offices. The Banking Commissioner refused to act on the application on the ground that he had no authority to approve or disapprove the establishment of branch offices. His refusal to act stemmed from an earlier opinion of office counsel for the Banking Commission, which was to the effect that the Banking Commissioner lacked such authority.
Following failure of the Commissioner to act on its application, respondent proceeded with preparations for establishment and opening of the branch offices and actually opened and began doing business at one such office at 5306 Palm Center in Palm Center Shopping Center on September 1, 1956. On March 11,1957 the Attorney General advised the Commissioner that prior approval of the Commissioner was prerequisite to the establishment and operation of branch offices. On April 26th, in response to an inquiry from respondent, petitioner advised that the branch office at 5306 Palm Center was in operation and that two others would be opened on June 1st. Thereupon, petitioner's attention was called to the Attorney General's opinion of March 11th. This suit was filed on December 10, 1957. At that time only the one branch office had been opened. On January 29, 1958 the Building and Loan Section of the Finance Commission of Texas, acting pursuant to authority contained in Art. 342-114, Vernon's Ann.Tex.St, and respondent Commissioner promulgated certain Rules and Regulations governing the granting of charters to building and loan associations and the establishment of branch offices. At the time of trial petitioner had not sought approval of its application under and in keeping with the rules and regulations so promulgated.
The trial court found that at the time the rules and regulations were promulgated the branch office at 5306 Palm Center had been opened and that petitioner "had spent substantial sums, made substantial commitments and spent many months' time of its officers, agents and employees in preparing for the opening of five other branch offices". The trial court concluded that prior to adoption of the rules and regulations there were neither statutes nor valid rules and regulations promulgated by the Building and Loan Section of the Finance Commission prohibiting the opening of the branch offices without prior approval of the Commissioner. It was obviously because of that conclusion that the trial court granted the injunction prayed for. In dissolving the injunction the Court of Civil Appeals held that the statutes as they existed prior to promulgation of the January rules and regulations did require prior approval of the Commissioner before the opening of branch offices. We agree with the Court of Civil Appeals.
Regulation of building and loan associations is provided for in Articles 881a-1 through Article 881a-69, Vernon's Annotated Texas Statutes. There is no provision in the Articles which expressly authorizes building and loan associations to establish and operate branch offices. That authority may reasonably be implied, however, from the provisions of a number of the Articles, e. g., 881a-10, 881a-13, 881a-17, 881a-29, subd. 3. Neither is there express provision in any of the Articles which requires approval of the Commissioner for the establishment and operation of branch offices. We believe, however, that requirement of such approval is necessarily implied by the provisions of Articles 88la-2 and 88la-7.
Article 881a-2 deals specifically and expressly with the granting of charters. The Article provides that before granting a certificate the Commissioner shall ascertain " whether the public convenience and advantage will be promoted by allowing such proposed building and loan association to be incorporated and engaged in business, and whether the population in the neighborhood of such place and in the surrounding country affords a reasonable promise of adequate support for the proposed building and loan association". Article 881a-7 directs that the Commissioner "shall have supervision over and control of all building and loan associations doing business in this state and shall be charged with the execution of the laws of this state relating to such associations". If the power to establish and operate branch offices is to be implied and the public policy declared by the Legislature in Article 881a-2 for the protection of stockholders, depositors and the public generally is to be enforced, some restraint on the establishment and operation of branch offices must also be implied; otherwise, the determination made by the Commissioner in the first instance is rendered nugatory.
It is undoubtedly the purpose of Article 881a-2 to protect against the evils of excessively zealous competition through control of the number of building and loan associations in a specified area. That purpose can be completely frustrated if branch offices can be opened without the approval of the Commissioner at any place selected by the directors of an existing association. Having been denied a charter to operate in area A but granted a charter to operate in area B, an association could then establish a branch office in area A and thus by indirection secure rights and privileges which had been denied to it on the statutory ground that the establishment of the office was inimical to the public interest.
A statute should not be shorn of its effectiveness if its purpose can be achieved by a reasonable interpretation. Huntsville Independent School Dist. v. McAdams, 148 Tex. 120, 221 S.W.2d 546; Haverbekken v. Hale, 109 Tex. 106, 204 S.W. 1162. That principle should control here rather than the one for which petitioner contends, i. e., that administrative officers and boards can exercise only such authority as is conferred upon them by the Legislature. Board of Insurance Commissioners of Texas v. Guardian Life Ins. Co. of Texas, 142 Tex. 630, 180 S.W.2d 906; Humble Oil & Refining Co. v. Railroad Commission, 133 Tex. 330, 128 S.W.2d 9. We hold that the power of the Banking Commissioner to approve or disaprove the establishment and operation of branch offices of building and loan associations is necessarily implied by a reasonable interpretation of Articles 881a-2 and 881a-7.
Petitioner contends that the statutes are unconstitutional if they be given the interpretation we have given them because they set no standards by which approval or disapproval of branch offices is to be determined. Generally, a legislative delegation of rule-making authority must fix standards in order to be valid. Housing Authority of City of Dallas v. Higginbotham, 135 Tex. 158, 143 S.W.2d 79, 130 A.L.R. 1053. But under our interpretation of Article 881a-2 the same basic standards are set for the approval or disapproval of applications to open branch offices as are set for the granting of an application for a charter in the first instance. The statutory standards of public convenience and advantage, and adequate population to assure reasonable support, are sufficient statutory basis for the rules and regulations. Trapp v. Shell Oil Co., 145 Tex. 323, 198 S.W.2d 424; Housing Authority of City of Dallas v. Higginbotham, supra.
Petitioner contends that even if approval of the Commissioner is required for the opening of branch offices, it is nevertheless entitled to affirmance of the trial court's injunction against interference by the Commissioner with the opening of its six branch offices. It predicates this contention upon the finding of the trial court that the one office had been opened and that substantial sums of money and time had been spent and substantial commitments made toward establishing the other five.
Petitioner does not contend that the Commissioner is estopped from requiring it to secure his approval before opening the branch offices. On the contrary it disavows in its briefs in this Court, many times over, that it claims an estoppel. What petitioner does contend is that the Commissioner's declination to act on the letter application made in 1954 on the ground of a lack of power to act, amounted, in law, to approval. In support of that contention petitioner cites State v. Jarmon, Tex.Civ.App., 25 S.W.2d 936, writ dismissed; Box v. Newsom, Tex.Civ.App., 43 S.W.2d 981, and City of Dallas v. Rosenthal, Tex.Civ.App., 239 S.W.2d 636, writ refused, n. r. e. None of the cited cases support the contention advanced.
In State v. Jarmon the Railroad Commission failed to act within a reasonable time on an application for a permit to drill an oil well, whereupon Jarmon proceeded to drill without the permit. The State then sought an injunction to restrain the drilling of the well. The Court held that the State; like any other litigant, could not obtain relief from, a court of equity when its own conduct had been arbitrary, unreasonable and inequitable. In the case before us the Commissioner is not seeking equitable relief.
Box v. Newsom can be of no comfort to petitioner. In that case Newsom and other truck operators sought and obtained an ex parte temporary injunction restraining Sheriff Box from arresting them for operating their trucks on the highways of the state without permits. The Court of Civil Appeals dissolved the injunction, holding- that the mere fact that the plaintiffs had filed applications for permits did not authorize them to operate without permits, and that if the Railroad Commission was actually and designedly refusing to grant hearings to the plaintiffs on their applications their remedy was by writ of mandamus to compel the Commission to perform its duty and set the applications for hearing.
City of Dallas v. Rosenthal was a suit by the City of Dallas to enjoin Rosenthal from using his property in violation of certain zoning restrictions. The trial court denied the relief sought. The Court of Civil Appeals affirmed. Many issues were involved in the appeal. It is enough to distinguish the case from the instant case that affirmance was rested, in part at least, upon a holding that because of the conduct of its officers the city, as in the Jar-mon case, was in no position to seek equitable relief, and, moreover, was estopped to seek it. In the instant case the Commissioner seeks no equitable relief and petitioner disavows any claim of estoppel.
The ultimate power of the Commissioner under Article 881a is not to approve or disapprove the installation or equipment of a physical plant to- be used in the operation of a branch office, but to approve or disapprove the opening and operation of a branch office in carrying on the business of a building and loan association. Any requirements which may be made with respect to physical plant are purely incidental. Normally, a building and loan association will apply for and be granted a permit to open and operate a branch office before a physical plant for that purpose is established and equipped, but a premature expenditure of time and money in the preparation of an office will not require approval of an application to open and operate the office, regardless of whether the expenditure is made prior or subsequent to the application.
Petitioner has made applications for permission to open six branch offices.. The application has never been heard or acted upon, admittedly because at the time-it was made the Commissioner was of the opinion that he had no power to act. But however that may be, when the Commissioner was properly advised that he did' have the power and that it was his duty to act, five of the offices were not open and operating and it was petitioner's duty, if it wished to avoid the possibility of a further futile expenditure of time and money, to then reurge its application and secure approval thereof. The failure of the-Commissioner to act and the expenditure-of time and money and the making of substantial commitments in the preparation of places of business in which to operate the branch offices did not operate, in law,, as an approval of the opening and operation of the five branch offices. Petitioner may-yet reurge its application to open and operate those five branch offices. Inasmuch as-the rules and regulations of January 29, 1958 governing the making and approval of such applications were in effect before-those offices were opened — if they have been opened — there is no reason why they should not apply to and govern the application and the approval or disapproval' thereof. Petitioner acquired no vested' property rights by making expenditures- and commitments before approval of the-application, and the rules and regulations-of January 29, 1958 are not out of harmony-with the requirements of Article 881a-2. The reasonableness of the rules is not in-, question.
On the other hand, there has been-, an implied approval of the opening and' operation of the branch office in Palm, Center Shopping Center. Like branch offices of other building and loan associations-which, as shown by the record, have been open and operating for many years without express approval of the Commissioner, that office was opened and began operation with his knowledge and without interference or hindrance by him. Since the statute re quired his approval it was his duty, regardless of his understanding or misunderstanding of it, to see that the office was not opened and put in operation without his approval. When he stood by and permitted the office to be opened and put in •operation, it had his tacit approval and the law will imply approval. Approval does not rest upon an estoppel but upon a legal implication. The only case found which is fairly analogous is City of Erie v. Baldwin, 136 Pa.Super. 496, 7 A.2d 484, 488. In that case Baldwin, who was operating a public market, sought to defeat a license tax levied on that type of business by contending that he was not liable for the tax because he had not secured a license or permit, required by ordinance, to operate a public market. The court held that since the business was in operation as a public market the law would imply that a permit to operate it as such had been granted. The Court said:
"It is also true that in Pennsylvania the proper municipality may grant or refuse the privilege of conducting a public market, but permission to engage in the business which appellant certified he was conducting may be implied from the failure of the municipal officers charged with the duty of exercising its police powers to take any action looking toward its suppression."
We are not to be understood as holding that a public official may legalize an unlicensed business required by law to be licensed by winking at its unlicensed operation.
In so far as the judgment of the Court of Civil Appeals affirms the judgment of the trial court denying the declaratory judgment sought, it is affirmed. In so far as the judgment of the Court of Civil Appeals reverses the judgment of the trial court, it is reversed, and the judgment of the trial court in granting an injunction is modified so that the writ of injunction shall operate to restrain and enjoin the respondent from interfering with the operation of petitioner's branch office at 5306 Palm Center in Palm Center Shopping Center.