Court Opinion

ID: 9681058
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:43:20.653994+00
Date Added: 2024-06-11T18:17:31.985757
License: Public Domain

CALVERT, Chief Justice.
L. D. Cain and others, Respondents, filed an application with the Savings and Loan Commissioner of Texas for the issuance of a charter for, and for permission to open and operate, a savings and loan association in downtown Houston under the name of Metropolitan Savings Association. The Commissioner entered his order refusing to issue the charter.
Respondents seek by this suit to vacate the order of the Commissioner and to require that he issue the charter. The trial court granted the relief sought, and the Court of Civil Appeals has affirmed the trial court’s judgment. See 379 S.W.2d 699. We affirm the judgments of the Court of Civil Appeals and of the trial court.
All except two of the statutory prerequisites for the granting of the charter were found affirmatively by the Commissioner and were stipulated by the parties in the trial court. Art. 881a-2, Vernon’s Texas Civil Statutes, in force when Metropolitan’s charter was applied for and refused, but since repealed by Acts 1963, 58th Leg., p. 269, ch. 113, § 2 (see Art. 852a, Savings and Loan Act), required affirmative findings by the Commissioner, prerequisite to the granting of the charter, that (1) the public convenience and advantage would be promoted by allowing the proposed building and loan association to be incorporated and engaged in business, and that (2) the population in the neighborhood of the place of location and in the surrounding country afforded a reasonable promise of adequate support for the association. Rules and Regulations promulgated by the Commissioner for implementing the statutory “public convenience and advantage” prerequisite required proof and a finding that the incorporation of the association would not unduly injure any other association. With respect to these matters, the Commissioner made the following findings:
“2. The public convenience and advantage will not be promoted by allowing such proposed association to be incorporated and engage in business taking into consideration (a) that the neighborhood and surrounding country is presently being served by seventeen (17) savings and loan associations, each operating in said neighborhood and the incorporation of the proposed association would result in an excessive number of savings and loan associations operating there and increased competition among such associations would be unduly injurious to all of such associations; and
“3. The population of the neighborhood of the place where the proposed association is to be located and the population of the sur*170rounding country does not afford a reasonable promise of adequate support for the proposed association taking into consideration that the neighborhood and surrounding country is presently being served by seventeen (17) savings and loan associations, each operating in said neighborhood.”
It was on the basis of these findings that the charter was refused.
The discretion conferred on the Commissioner to grant or refuse charters by Arts. 881a-2 and 881a-3, Vernon’s Texas Civil Statutes, was not an unbridled discretion; his findings could not be arbitrary or capricious, but must have had support in substantial evidence. Phillips v. Brazosport Savings and Loan Ass’n, Tex.Sup., 366 S.W.2d 929; Gibraltar Savings and Loan Ass’n v. Falkner, Tex.Sup., 371 S.W.2d 548; Benson v. San Antonio Savings Ass’n, Tex.Sup., 374 S.W.2d 423. In this case the Commissioner not only refused to make the prerequisite affirmative findings, but made findings diametrically opposed thereto. Thus, before the judgments of the courts below may be affirmed, we must hold that the findings made are not supported by substantial evidence, and that the evidence so conclusively required affirmative findings that the refusal to make them was arbitrary or capricious. We do so hold.
Petitioners present six points of error in this Court under which they seek to support the Commissioner’s findings. Their first five points are briefed together and assert that there is in the record substantial evidence to support the Commissioner’s finding that public convenience and advantage would not be promoted by issuing a charter to Metropolitan because the increased competition would be unduly injurious to all Houston savings and loan associations. Their sixth point is devoted to the same finding but asserts that the increased competition would be unduly injurious only to Surety Savings & Loan Association.
We will deal first with the grouped points. Twenty-eight pages of Petitioners’ application for writ of error are devoted to a statement of the evidence and their argument in support of these points. Twenty-six of the twenty-eight pages deal, from one angle or another, with the economic “squeeze” on Houston savings and loan associations at the time the Commissioner refused to approve the articles of incorporation of Metropolitan and to issue the charter. As we view the record, there is no substantial evidence in the record supporting the Commissioner’s finding unless it be the “squeeze” evidence. Therefore, we limit our discussion of these points to that evidence.
Petitioners’ own summary of the evidence supporting their position and some of their deductions therefrom, are quoted at length in the opinion of the Court of Civil Appeals. See 379 S.W.2d 702-704. It would serve no useful purpose to set out the evidence in detail in this opinion. It may be summarized thusly: In December, 1961, Houston banks increased their interest rate on time deposits to 4%, and thus forced Houston building and loan associations to increase their dividends on deposited savings to 4Y2%. The increased dividends caused a tremendous growth in savings from that time until the date of the Commissioner’s order. Profitable operation requires that there be a spread of 2)4% between dividends paid on savings and interest received on mortgage loans in which funds are invested, and a break-even spread of 1%% is required. Mortgage loan interest rates did not increase contemporaneously with increased dividends, and one association was compelled to invest in mortgage loans yielding an average interest of 6.05% and in some loans yielding even less. Moreover, the overabundant supply of savings and available money from other sources brought on keen competition for mortgage loans, and led some of the associations having a policy of making 80% loans to make less desirable 90% loans. If Metropolitan is chartered and permitted *171to engage in business, the competition for mortgage loans will to that extent be increased, and existing associations will be injured in that the mortgage loans in which Metropolitan invests will not be available to them.
Petitioners’ summary of the evidence also reflects that one of them relieved the pincers of the “squeeze” by reducing its dividend rate from 4[4% to 4% until a large part of its excess savings had been withdrawn, and that it nevertheless had a 20% “growth” during the year; that while some of them had made 90% loans, none of them had made loans that did not have approval of the Commissioner; that while they would lose mortgage loan investments which Metropolitan would get, the financial structure and soundness of none of them would be threatened thereby.
Petitioners’ evidence, fairly summarized above, simply does not, in our opinion, constitute substantial evidence in support of the Commissioner’s finding that chartering Metropolitan would unduly injure existing associations. It establishes only that by raising dividends existing associations can create a detrimental imbalance in savings and investments and thus slow down the “growth” they like to have; and that this “growth” will be somewhat more satisfactory if no other association is permitted to enter the arena as a competitor. The same arguments could have been urged, of course, by the first Houston association against the chartering of the second of the existing associations, and, in turn, by the then existing associations against the chartering of each one subsequently chartered. But the “public convenience and advantage” of which the statute speaks is not thus to be determined. Competition is the lifeblood of a free enterprise economic system. It is only because savings and loan associations are affected with a public interest, Brazosport Sav. & L. Ass’n v. American Sav. & L. Ass’n, 161 Tex. 543, 342 S.W.2d 747, that they are protected from undue injury brought about by excessive competition. Southwestern Sav. & L. Ass’n of Houston v. Falkner, 160 Tex. 417, 331 S.W.2d 917. There is no evidence here that the chartering of Metropolitan would provide excessive competition for existing associations which would result in undue injury to them.
But inasmuch as the Commissioner refused the charter, the burden was on respondents to establish that the refusal of the Commissioner to make affirmative findings entitling them to the charter was arbitrary or capricious. The evidence introduced by respondents is summarized in the opinion of the Court of Civil Appeals. See 379 S.W.2d 705-710. In our opinion, the evidence tendered so conclusively required affirmative findings that the public convenience and advantage would be promoted by issuing a charter to Metropolitan and that such action would not result in undue injury to existing associations that the failure of the Commissioner to make those findings was arbitrary and capricious. Our decision in Benson v. San Antonio Savings Association, Tex.Sup., 374 S.W.2d 423, is not controlling here. Each substantial evidence case must be decided on its own facts, and the facts in two such cases will rarely be the same. We regard the facts in this case as more nearly like those in Gibraltar Savings & Loan Ass’n v. Falkner, Tex.Sup., 371 S.W.2d 548.
As heretofore noted, petitioner’s sixth point asserts that' there is in the record substantial evidence to support a finding that issuance of a charter to Metropolitan would unduly injure Surety Savings & Loan Association. The claim here is that since Surety is a new association in downtown Houston, chartering of Metropolitan would “make it more difficult for Surety to increase its volume of savings to a satisfactory level.”
We doubt that proof of nothing more than that chartering a new association will make it “more difficult” for an existing new association to increase its savings to “a satisfactory” level can, under any circumstances, constitute substantial evidence to *172support a finding of undue injury to the association. More difficult than what norm? What is a satisfactory level? And to whom must it be satisfactory?
Surety was chartered in the fall of 1961, and in the first fifteen months of its existence had accumulated savings and mortgage loans in the sum of $5,000,000. It has made no marginal or substandard loans, has at all times maintained its required reserves, and its officers are satisfied with its rate of growth which was better than had been anticipated. Its officers are “concerned” only about the effect that chartering Metropolitan may have on accumulation of savings. The evidence of Houston’s dynamic population and economic growth, experienced in recent years and forecast for the immediate future, leaves little basis for Surety’s concern.
The “public convenience and advantage” of which the statute speaks relates primarily to the convenience and advantage of those members of the public at large who may wish to do business with savings and loan associations, either as depositors or as borrowers, and only secondarily with the right or privilege of associations to be free of competition. While it is undoubtedly a matter of public convenience and advantage that the number of chartered institutions be kept within limits that will permit existing institutions to remain solvent and to operate on á reasonably profitable basis so that the incentive will exist to continue to serve the community’s needs, the provisions of the statutes can hardly be stretched to equate public convenience and advantage with an underwriting of “growth” satisfactory to officers and directors. By expressly providing for a right of appeal when a charter is refused but for no right of appeal when one is issued, the Legislature indicated its intention that the Commissioner’s discretion was to be exercised liberally in the issuance of charters.
The judgments of the Court of Civil Appeals and the trial court are affirmed.