Court Opinion

ID: 4144069
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:40:52.238313+00
Date Added: 2024-06-11T14:29:37.026044
License: Public Domain

Hon. Lee Brady, Commissioner             Opinion No. O-2319
Department  of Banking                   Re : May exeminers     or offi-
Austin,  Texas                           cials  of the Banking Depart-
                                         ment discuss   with the Insur-
                                         ance Department *s examiners
                                         and examiners from the kttor-
                                         ney General’s   Department and
                                         the Secretary   of State’s      Of-
                                         fice  matters  contained   in
Dear Mr. Brady:                          the reports   mentioned?

             Woebeg to acknowledge      receipt of your letter           re-
questing    a legal    opinion  from this department upon the            above
captioned    question,     your letter  being as follows:

             l’Simultaneous    examin&ions      have been made of
      certain     companies of this State by several           of the
      departments     of the State government respectively
      having supervision       thereof.     There is reason       to
      believe    that these companies are affiliated            either
      through common stock ownership           or otherwise,      and
      that there may be an exchange of assets               or other
      operations     which make it difficult        for one depart-
      ment to intelligently        examine the companies under
      its supervision      without    information     relative    to
      other companies which are not under its supervi-
      sion.     This department was one of the examining
      departments.

            ‘IWe should like your opinion      as to whether
      or not examiners     or officials   of this department
      could discuss    with the examiners     or officials   of
      other examining departments       matters contained    in
      the reports    of the different    departments.

             “We will  appreciate     your giving  this your        con-
      sideration    and advising     us of your opinion.”

           In the governmental     scheme the State in the exer-
cise of the undeniable     right  of control   or supervision    of
its domestic  corporations     and other corporations     doing busi-
ness in this State has conferred       upon dii’ferent  officers    of
-

                                                                                        1
                                                                                            _-_

    Hon. Lee Brady,        page 2

    the government the power of visitation               and examination      of
    such institutions or corporations.

                    Notable illustrations           of this authorized  right of
    visitation      and examination     are      found in the following    stat-
    utes:

                    Article     1366 declares:

                     “Every corporation,     domestic or foreign,
             doing business     in Texas, shall permit the At-
             torney General or any of his authorized           assist-
             ants or representatives,       to make examination        of
             all the books,     accounts,   records,    minutes,    let-
             ters,   memoranda, documents,      checks,   vouchers,
             telegrams,    constitution    and by-laws,    and other
             records    of said corporation     as often as he may
             deem necessary.”

                     Article    358 provides:

                    “The commissioner     (Banking Commissioner)    shall
             cause each banking corporation       incorporated   under the
             laws of this state,     subject  by law to examination,      to
             be thoroughly    and fully   examined at least    every six
             months and at such other times as the commissioner           may
             deem necessary.”

                     Article    881a-7 of the Building    and Loan Associa-
      tion    Act   (Vernon’s    Civil Codification)   provides:

                    Y-ie (the Banking Commissioner)       ‘shall  like-
              wise appoint    such building     and loan examiners as
              In his judgment may be necessary         to examine at
              proper and suitable     intervals    all building     and
              loan associations    under his supervision0        . O”

                     Section    63 of   the   same Act further    declares:

                     “Bvery foreign    building    and loan associa-
              tion doing business      in this state shall be subject
              to the same examination        as are building   and loan
              associations    organized    under the laws of this
              state.”

                  The Board of Insurance   Commissioners             or some indi-
      vidual   commissioner   of such board is authorized             by several
      statutes   to examine or cause to be examined the               various   types
      of insurance    companies;  notably, the following             instances:
Hon. Lee Brady,       page   3

             Revised Civil  Statutes Articles 4701, 4720  4769,
4801,    4806, 4859f, 486Ca, sub. 26, 4881, 4910, and 5030.

             The Secretary    of State in the administration      of
the Securities      Hct is authorized    to make certain   examina-
tions,  illustrations      of which authority   are found in Articles
6COa and 6573a of Vernon’s        Revised Civil  Statutes.

            These citations     are by no means all inclusive                 of
the statutory    authorization     to examine,   but they typify              such
legislative   intention     of corporate  control.

             The obvious        purpose of these and other similar              stat-
utes is to afford         to the State the opportunity           to ascertain
the necessary      facts     to aid in the effective         administration        of
the laws controlling           the institutions       and corporations       affect-
ed thereby.       The information        obtained     by such visitations        and
examinations      and from        the required     statements    or reports      is
of course for the immediate aid to the particular                    officer     or
functionary      exercising       the right of visitation        or examina-
tion but mediately         for the benefit       of the State,     whose serv-
ants such officers         and functionaries        are.   They are a part
and parcel     of the State’s        plan ,for executing      the laws of the
State.    Each such visitation           therefore     is a part and parcel
of the general       governmental       plan or scheme of the State it-
self.    As evidence        of which the following        excerpt    from the
statutes    will    suffice.

           ,Article  1.369 of the statutes  with respect   to exam-
inations  made by or under the authority      of the Attorney Gen-
eral - which is the broadest     power conferred    upon any State
officer  - declares:

               “The .Attorney General,      or his authorized     as-~
        sistants    or representatives      shall not make public,
        or use said copies      or any information     derived    in
        the course    of said examination       of said records     or
        documents,    except in the course       of some judicial
        proceedings    in which the State is; a party,        or in a
        suit by the State to cancel         the permit or forfeit
        the charter     of such corporation,      or to collect     pen-
        alties   for a violation      of the laws of this State,
        or for information      of any officer     of this State
        charged with the enforcement         of its laws.“’

             It is here made clear that while the information
obtained   by the Attorney General is for the immediate purposes
of that officer,     nevertheless,      it is for the ultimate  use of
“any officer     of this state     charged with the enforcement    of its
laws.”
Hon.   Lee Brady,    page   4

              article 3352 of the Revised Civil Statutes, pre-
scribing    the oath to be taken by the examiner and the con-
ditions    of his bona, declares:

              “Each examiner before          entering     upon the
       duties     of his appointment,        shall take and file
       in the office        of the Secretary      of State an oath
       to support the constitution            of this     state,   to
       faithfully      demean himself      in office,      to make
       fair   and impartial        examinations,      and that he
       will   not accept       as present    or emoluments any pay
       directly      or indirectly     for the discharge         of any
       act in the line of his duty other than the remun-
       eration     fixed    and accorded     him by law, and that
       he will not reveal          the condition      of any bank or
       bank and trust         company examined by him or any
       information       secured    in the course       of any examina-
       tion of any bank or bank and trust                company to
       anyone except the commissioner.             I1

          Article   881a, Sub. lOa, with respect   to the Bank-
ing Commissioner’s   examinations  of building  and loan asso-
ciations, declares:

              “Any regulatory     or other public      authority
       or officer    of this state required,        authorized,
       or permitted     to examine any institution        which
       is a member of a Federal Home Loan Bank or which
       is insured    by Federal     Savings and Loan Insurance
       Corporation,     may in lieu of making any such exam-
       ination,    accept an examination      of any such insti-
       tution    made by the Federal Home Loan Bank Board,
       a Federal Home Loan Bank, 01' Federal           Savings and
       Loan Insurance      Corporation,    or may examine any
       such institution      in conjunction     with the Federal
       Home Loan Bank Board, a Federal Home Loan Bank,
       or Federal     Savings and Loan Insurance        Corporation.
       any such regulatory       or other public     authority
       or officer     may make available     to the Federal      Home
       Loan Bank Board, the Federal Home Loan Bank in
       which an association       holds membership,      and Federal
       Savings and Loan Insurance         Corporation,     any inform-
       ation ftirnished     to or obtained     by and all or any
       part of any report       of any examination      of any such
       institution     made by any such regulatory         or other
       public    authority   or officer.”

           These statutes        are sufficient     to indicate   the pub-
lic policy  of the State        with respect    to such regulatory    mea-
sures and to accentuate         our statement     above,  that the
_.   -

         Hon. Lee hrady,     page   5.

         examinations     authorized    by law are not for the exclusive    bene-
         fit  of the particular      officer  making the examination,    but in
         a larger    sense,   are for the benefit   qf the State and the pub-
         lit  interest.

                      While it is true that reports      and statements   and
         information     obtained by the State through authorized       examina-
         tions   are privileged   under the law, such rule of ,prQvilege
         pertains    only to the compulsory   disclosure     of such information
         by the person - the officer     - possessing     the same to a person
         or purpose other than that contemplated         by the statutes   under
         which the information     has been obtained.

                     Even this privilege   to the officer  is not for the
         purpose of preventing    any and all disclosures    by him, but on
         the contrary,   rests largely   in the discretion   of the officer
         himself  having in mind the nature of the information      and the
         purpose for which the disclosure      is sought.

                     In our Opinion       No. o-52,   we stated:

                    “It is    therefore     the   opinion   of this   depart-
               ment that:

                      “(11     The rule of privilege       pertaining     to
               examiners t reports       obtains   with respect     to insti-
               tutions     (banks)  that are closed       and actively      en-
               gaged in their      corporate     business   at the time the
               report    is called    for or the privilege        invoked.

                     “(2) The rule of privilege  pertaining   to             ex-
               aminers’ reports  applies to loan and brokerage               com-
               panies the same as to banking institutions.

                    “(3)   The Banking Commissioner       has discretion
              in the manner of making public         examiners’ reports
              by giving    copies   thereof   or permitting   the inspec-
              tion thereof,     or in testifying     or permitting     exami-
              ners to testify      under his supervision     and express
              permission,    limited    only by his decision     and dis-
              cretion    of whether or not the making public         of such
              information     is to the public    interest.”

                   In an exhaustive     opinion   by this department,    written
         by C. M. Cureton,  First   Assistant    Attorney  General,  late Chief
         Justice of our Supreme Court,      addressed   to the Commissioner     of
         Banking and Insurance,   the conclusion      was announced:
.   .   -

            Hon. Lee Hrady,     page   6

                        "You have the authority    in your discretion
                  to permit Mr. Goodnough (the examiner)      to testi-
                  fy to any fact  or facts   obtained   by him in the
                  course of his examination     of this bank, when you
                  t&k   that such disclosure   would not be prejucli-
                  cial  to public interest."

                       "The same rules would apply to the copies         of
                  the examiners'  report  on file    in your department,
                  or to any other information     received   by you in
                  your official  capacity  concerning     the affairs  of
                  this bank."

                         Upon these authorities         and considerations,    we are
            of the opinion      that where an officer       such as mentioned by
            you possesses      any examination      report  or information    as to
            any institution      or corporation      in this State that would rea-
            sonably   be helpful     to any other officer       or department of the
            Government in the exercise          of a governmental      power or func-
            tion,   it would be entirely        within his power and authority        to
            cooperate    with‘such     officer    or department    of the State in
            the manner indicated        by your question.       Such, we think,    is
            the established      policy     of the State.

                                                     Yours   very   truly

                                                     nTTORNEYGENERALOF TEX&S

                                                     By /s/ Ocie     Spear
                                                     Ocie Speer,     assistant

            APPROVEDMAY 14, 1940
            /s/ Gerald C. Mann
             QTORNEY GENERALOF TEXAS

            APPROVED: OPINION CUMMITTEE
            BY:      BhB, Chairman

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