Court Opinion

ID: 9681059
Source: CourtListenerOpinion
Date Created: 2023-08-24 07:43:20.659064+00
Date Added: 2024-06-11T18:17:31.988597
License: Public Domain

GRIFFIN, Justice
(dissenting).
I find myself in disagreement with the majority opinion herein, and respectfully file this dissent.
I agree that the case is one to be tried, on appeal, under the substantial evidence rule. The majority has correctly stated the burden that rests upon respondents herein, if they are to overturn the order of the Commissioner refusing to grant a charter to Metropolitan.
The error of the majority, as I see it, is that it seeks to weigh and evaluate the evidence unfavorable to the Commissioner’s action, rather than determine if the evidence in the record reasonably supports that order.
In the late 1930’s and 1940’s the substantial evidence rule and the manner in which courts should deal with appeals from the orders of administrative agencies was the subject of much writing by this Court.
Most of the cases involved the orders of the Railroad Commission in oil and gas matters.
In 1939, in the case of Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, this Court said:
“ * * * Stated In another way, the court does not act as an administrative body to determine whether or not it would have reached the same fact conclusion that the Commission reached, but will consider only whether the action of the Commission in its determination of the facts is reasonably supported by substantial evidence. (Citing authorities). To permit the court to substitute its fact findings on controverted issues of fact in such instances would add nothing of value to the administration of the law or the rule under discussion, but, to the contrary, would destroy all uniformity of Commission administration thereunder.” (Emphasis added.)
*173Unless otherwise indicated, all emphasis herein is that of the writer.
In 1942, Chief Justice Alexander wrote for the court the case of Railroad Commission v. Shell Oil Co. Inc., 139 Tex. 66, 161 S.W.2d 1022, generally known as the “Trem Carr” case.
But, this Court in the “Trem Carr” opinion recognized the rule to be applied on review to be:
“ * * * If the matter covered by the order is one committed to the agency by the Legislature, and involves the exercise of its sound judgment and discretion in the administration of the matter so committed to it, the court will not undertake to put itself in the position of the agency, and determine the wisdom or advisability of the particular ruling or order in question, but will sustain the action of the agency so long as its conclusions are reasonably supported by substantial evidence.
“ * * * The record is to be considered as a whole, and it is for the court to determine what constitutes substantial evidence. The court is not to substitute its discretion for that committed to the agency by the Legislature, but is to sustain the agency if it is reasonably supported by substantial evidence before the court.”
In order to furnish the bench and bar a rule by which they could be guided in trying the appeal, this Court said:
“If the evidence as a whole is such that reasonable minds could not have reached the conclusion that the agency must have reached in order to justify its action, then the order must be set aside.”
In 1946, in order to try to determine the proper rule to be applied, this Court wrote the “Trapp Case,” Trapp v. Shell Oil Co., 145 Tex. 323, 198 S.W.2d 424. In that case this Court refused to recognize the use of the “great weight and preponderance” rule as set forth in the “Trem Carr” and the Marrs cases, but held that the rule announced in the Gulf-Atlantic case, supra, was “now the prevailing rules declared by this court.” In writing on rehearing, the Court approved the test above quoted from the “Trem Carr” case, to-wit:
“The court is not to substitute its discretion for that committed to the [administrative] agency by the Legislature, but is to sustain the agency if it is reasonably supported by substantial evidence before the court. If the evidence as a whole is such that reasonable minds could not have reached the conclusion that the agency must have reached in order to justify its action, then the order must be set aside.” (This emphasis is that of the court in quoting the above rule.)
So far as I am able to ascertain by the use of Shepard’s Southwestern Citations, this rule has not been criticized, or overruled, and has been followed down to the present in many cases.
In the case of Gibraltar Savings & Loan Association v. Falkner, Tex.Sup.Ct., 371 S.W.2d 548 (1963), in discussing the burden upon one, under the substantial evidence rule, appealing from an order of the Banking Commissioner refusing an application (who at the time the case was tried had the powers of the present Savings and Loan Commissioner) we stated the rule to be:
“ * * * This may be done by a showing that all of the evidence available to the Commissioner, and given in the trial court on appeal, so conclusively demands an affirmative finding on all requirements that a negative finding on any requirement can have no support in substantial evidence; therefore negative findings are arbitrary.” (Citing many authorities.)
In Board of Water Engineers et al. v. Colorado River Municipal Water Dist. et *174al., 152 Tex. 77, 254 S.W.2d 369, 372 (1953), 1st col., this Court said:
“Under that rule [the substantial evidence rule] the court makes an independent determination from the evidence adduced at the trial of whether the administrative order is reasonably supported by substantial evidence. * * * If an order is reasonably supported by substantial evidence it is reasonable; otherwise it is unreasonable.” Citing authorities. See also Hawkins v. Texas Co., 146 Tex. 511, 209 S.W.2d 338 (3, 4) for further discussion of the rule.
The majority, in my judgment, does not properly apply the rule.
In addition to the evidence set out in the majority opinion, I find the following facts testified to by witnesses in this case. I will summarize their testimony in the interest of brevity.
The date on which we are to determine the existence of substantial evidence is July 18, 1963, the date of the hearing before the Commissioner.
There is no denial of the fact that a savings and loan association must be able to get a greater interest rate on the money it loans to borrowers than the dividend rate (sometimes referred to as dividends) which it pays its depositors on their savings. This spread is to take care of the overhead expenses of the operation, the establishment of a reserve fund to care for delinquencies, losses, and provide a sufficient cushion to enable the association to meet unforeseen contingencies and still be able to operate. The testimony is that this spread between dividend paid to depositors and interest received on loans must be from 11/2% to 2%. The testimony shows that there had been a “squeeze” on savings and loan associations in the Houston area on July 18, 1963 (the date of the hearing before the Commissioner) due to the fact that the commercial banks in that area had raised their dividend rate paid to their depositors to 4%. The testimony shows that this forced the savings and loan associations to raise their rates to 4J4%. The testimony further shows that there was available in the Houston area much money seeking loans, in competition with savings and loan associations. The testimony further shows that as a result of this supply of lendable funds, the savings and loan associations in the Houston area had been forced to make loans up to 90% of the appraised value of the property offered as security, rather than 80% of the value and which is the generally accepted figure for safety and repayment; that in order to lend 90% a savings and loan association had to secure special permission from the Commissioner; that those associations which had secured such permission were having many more delinquencies on their loans and many more foreclosures, than under the 80% formula. The testimony further shows that the 4]4'% rate of dividend payment caused a 30% or better increase in the deposits of one association (Ben Franklin) and its lend-able funds were increasing out of proportion to the available loans and this resulted in an unhealthy and unsafe situation. This association sought to reduce its rate paid to 4%, but this action caused the withdrawal of so much savings that it appeared' this association would have to liquidate. Therefore, this association had to return to the old dividend rate of 414%. Having to pay this rate resulted in a situation where the loans available would not bring sufficient returns to operate and to take care of the required reserve. To meet this situation, this association had to issue and market $150,000.00 additional permanent stock and put the proceeds from this stock sale in the reserve account. There is testimony that although the assets of each of the existing associations had increased over the past few years, the reserves had declined, and that this decline was due to the “squeeze.”
There is testimony that the presence of such a large supply of lendable funds had *175resulted in fierce competition between the. seventeen existing and operating associations in the Houston area. This caused the making of marginal loans and what would otherwise have been undesirable loans. There is testimony that since 1962 and due to the increased lendable funds available, the interest rate on loans had decreased slightly as the dividend rate was increasing.
There is testimony that the effect of this is that the shrinking margin (called the squeeze) is so thin as to prevent profitable operations and maintaining the required reserve. This, if continued, will result in some of the seventeen associations now operating being forced to liquidate in the future or merge with the stronger and larger associations, thus decreasing the number that can profitably operate. There is testimony that the existing seventeen associations are capable of caring for in an efficient and satisfactory manner any increased business that may result from the economic expansion of the Houston area in the future as in the past. There is evidence that if the present applicant is given a license to operate, its existence will increase the effects of the “squeeze” and also increase the competition for available loans.
There is testimony that during the six months preceding July 18, 1963, the savings of one association had increased $18,000,000.00, whereas its loans had increased only $6,000,000.00. This means this association has $12,000,000.00 on which it must pay dividend, but is not earning interest. This is an unhealthy situation. The experience of Ben Franklin Association demonstrates that this association cannot reduce its dividend rate without being in serious danger of being forced into liquidation.
The evidence further shows that due to the excess savings the 4j4% dividend rates bring, and the competition for loans, some of the associations have been forced to buy loans with such low interest rate that there is a dangerously thin spread which might easily result in not enough yield to pay overhead and keep up the required reserve for the associations to maintain their liquidity.
The majority opinion implies that the existing associations want to be protected from competition. It is not that the existing associations want to be protected from competition, but that there is testimony that the competition of another association in the Houston area under conditions as they existed July 18, 1963, would cause “excessively zealous competition,”
This Court in Southwestern Savings & Loan Association of Houston v. Falkner, 160 Tex. 417, 331 S.W.2d 917, 920 (1960) said: “It is undoubtedly the purpose of Article 881 a-2 to protect against the evils of excessively zealous competition through control of the number of building and loan associations in a specified area.” To the same effect see Brazosport Savings and Loan Association v. American Savings and Loan Association, 161 Tex. 543, 342 S.W.2d 747, 750 (1961); Benson v. San Antonio Savings Association (Tex.Sup.Ct.1964), 374 S.W.2d 423.
There is further testimony that in the central business district of Houston, where applicant seeks to locate its home office, there are now offices of seven or eight savings and loan associations that are capable of rendering the necessary services to those desiring such facilities. The Commissioner has a right to consider that there are now seventeen savings and loan associations serving the Houston area. Not all savings and loan associations that apply to operate in the Houston area are entitled to a license to operate. Somewhere some agency must draw the line and have the power to say there are a sufficient number now operating and that additional ones may not be licensed to operate solely by virtue of the fact that none of the existing associations are insolvent, but are all solvent.
*176The business of licensing these associations is a legislative function and not a judicial function. The number that is for the best interest of any locality is largely a policy matter for legislative, not judicial, determination. The Legislature has delegated to the Savings and Loan Commissioner its power to determine this question. The courts should and must approve the Commissioner’s decision unless it is unreasonable, capricious or arbitrary.
We said in Benson v. San Antonio Savings Association (Sup.Ct.1963), 374 S.W.2d 423, “So the matter of drawing the line of demarcation (as to when to grant or refuse license), while nebulous, must lie, to a great extent, in the discretion of the Commissioner.”
The applicant relies on those cases wherein this Court has held the order of the Commissioner refusing the establishment of a branch office unreasonable, arbitrary or capricious. There is a difference in permitting an existing, already competing association to establish a branch office, and granting a license to another association to come into existence and thus increase the competition in the business. Viewing the record as a whole, I would hold that the Commissioner’s decision is reasonably supported by substantial evidence.
By “reasonably supported by substantial evidence” is meant that considering the record as a whole, the evidence is such that reasonable minds might reach the same conclusion. Neill v. Cook (Tex.Civ.App., 1963) 365 S.W.2d 824, 831, writ refused n. r. e.
I would reverse the judgments of both courts below and uphold the Commissioner’s decision refusing applicant a license to operate.
WALKER and HAMILTON, JJ., join in this dissent.