Court Opinion

ID: 4142997
Source: CourtListenerOpinion
Date Created: 2017-02-18 03:28:25.758109+00
Date Added: 2024-06-11T14:33:55.950519
License: Public Domain

.

              THEA             ORNEY            GENERAL
                             OF    TEXAS

    Honorable Wm. J';Lawson
    Secretary of State
    Austin, Texas
    Dear Mr. Lawson:                      Opinion NO. 0-3367
                                          Re:   Whether or not hearings under
                                                the Securities Act, to~'be,hXd
                                                by the Secretarg,of State, are
                                                to be conducted by the,.S@cre-,
                                                tary; or his Assistant, alane,
                                                or inaythe Secretary of State
                                                legally appoint the Securities
                                                Commissioner, or another per-
                                                son, to preside over and con-.
                                                duct such hearings?
              You request an opinion from this Department with respect
    to the construction of H. B. No. 521 Acts of the 44th Legisla-‘
    ture,"'RegularSession, knbwn as the 'Securitfes Act", with respect
    to'hearings by the Secretary of State, your letter being as fol-
    lows:
             "Under the provisions of House Bill Num-
       ber 521, Acts of the Forty-fourth Legislature,
       Regular Session, as amended, known as 'The Se-
       curlties Act' applicants ,for licenses under the
       provisions thereof, if their application'is
       denied or rejected, are entitled to a hearing
       rslativ6 to such application. Under Sections
       24, 25 and 26 the Secretary of State is author-
       iced to hold other heerihgs for the purpose of              '
       determInIng whether certain securities    ,shiill
       be abld anB.whether the"lloenas of the dealer
       OF a~lesnmn ahoulslbe oanoelled   for fraud or
       vlolatlon     of some provlslona     of the Aot.
               “Thla dspartmetit   would    8gpreOlate    having
       the banelit of your advice ea to whethor'or not
       thbse hearings o&n be held by the Seorekary of
       State or the Assistant    SeoiWary  of State alone
       or whether rruoh hearings   may be oonduoted by
       the Seouritles  Cornmlsslonsr provided for Ln !&oh
       Act or whether the Seorstary    of State mhg legally
       appoint the Seourltles Commissioner or any other
Honorable Wm. J, Lawson, page 2          O-3367

    individual to preside over and conduct such
    hearings.
          "In the event that you should answer
    thls'questlon that the-Securities CommLssion-
    6r inayconduct such heapings-or that the S&c-
    retary bf State may legally appoint the S‘ecur' ,
    lties"Cotiissioher OP some other lrid1vldual.'to
    c&duct such hearing, we woiildals'bappreciate
    having the benefit.of your advice as to'whether
    such appointment carries with It the power to
    render decisions In the matters Involved."
 ,,. _' Section 34 of the Securities Act 'tI3.B. No. 521,   oh.
100, Laws of 44th Legislature, p. 255) declares:
          "The kidministrationof the praviijionsof
   thIa Act shall be vested in the Secretary of
   State."                         .,
          Th6 Act prbvides for certaFn hearings before the Sec-
retary of State, notably Section 8, as follows:
         "Any Issuer a&the same is defined here-
   in who is diesatiafi&l wLth any rullingor de-
   cision of the SecFetarg of.'Stat&;m&g filki
   withyn t&n (10) days thereafter'an appllbation
   for a hearing before the, ecFetai?yof State
   tiho,shall,within teii (107 'days~'after"there-
   beipt of siichepPllci%tions&t sald~'hearlhgfor
   such tlineand plade as he ma fiXand shall
    give skid apfllicantten (107.days' notlce of
   such hearing.
          Section 24 8eclars:
          "The Secretary of State may, Ln the eii-
   Wcise of reasonable drscretlon hereunder, at
   any tUne, require a'dealer to file with the
   Seor"etaryof State a'llst of""seburitleswhich
    h‘ehas offered for sale or has advertised for
    sale within this State duringthe preceding six
    (6) months, br?which he'ia at the time offering
    for sale oi+adve'i%lsing,oFany portibn there-
   3f. No dealer, agent, or salesman shall sell
   ,ans &eiiurlttesotiia.&ueor publish within thie
   State-'anycircular,".advertlaement.;prospectus;
    program, OF othei mattep In the.nature thereof,
    &fter notibe in writing has been given hiWbg
    the Secretary of State that,In the Seoretary'of
Honorable Wm. J. Lawson, page 3         o-3367

    State's'opinion, the same
                           .- contains
                                _.     any state-
                                                .
    ment that is false or mlsleaalng, or OChemJlse
    likely to deceive a reader thereof, or that the
    sale of,such security would be unfair, unjust
    or inequitalbe,?OP fraudulent, provided, however,
    that In each case covered by such notice in
    writing the dealer,,egent'or salesman to whom
    such notice Is given shall be entitled to B
    hearing and an appeal as provided for in this
    Act. * + i"

          Section 25 is In part as follows:
          "If the Secretary of State at any time
    h&s reason to believe any dealer has Ln any
    w&y violated, or is violating, or about to vio-
    late any of the'provisions of this Act, or ties
    been guilty of any fraud'or fraudulent practice,
    then the Secretary of State may, after hearing,
    and having reasonable cause to believe.the
    dealer has been guilty of such offense, revoke
    saia dealer's registration, Notice of the time
    and place of'any such hearing shall be sent to
    such+dza;e;,,etleast seven (7) days prior there-
    to.
          Section 26 is as follows:
         "If the Secretary of State at any time
   has reason to believe any salesman or agent of
   any dealer has In any way violated or is vio-
   lating, Is about to violate any of the provi-
   sions of this Act, or has been guilty of any
   fraud OP fraudulentpractfce, then"the Secre-
   tary of State may, after hearfng, and having
   reasonable'ceuse to believe that the agent,or
   salesman has been guelty of such offense, revoke
   said agent's OP salesmen's registration,
   Notice of the time and place of such hearing
   shall be sent to such dealer and to suoh agent
   or s~l~s~~,,at least seven (7) days prior there-
   to.
          By the terms of Section 27 it is required that "All
decisions of the Secretary of State shall:be in writing signed
by the Secretary of State, and shall fully state the',grounds
therefor,"
          As a means to the effectiveness of those heelrings,Sec-
tion 29 clothes the Secretary of State wfth the following powers:
Honorable Wm. J, Lawson, page 4         O-3367

         "The Secretary of State may require, by
   subpoena OP summons issued by the Secretary
   of'state, addressed to the sheriff or any con-
   stable,"the attendance and testimony of wlt-
   nesses and'tbe production of any books, accounts,
   records, papers end correspondence or other re-
   cords or indices showing the names end addresses
   bf the stockhblders (except such books of eccount
   as are necessary to the continued conduct   of '
   the business, which books the Secretary of State
   shall have the right to examine or cause to be
   examined at the office of the concern ahd to
   requlre copies of such portion thereof as may
   be deemed necessary touching the matter In '~
   qiiestion,~whFchcopies shall be verified   by affi-
   davit of an officer of such concern and shall
   be admissible in evidence as Provided in Section
   31 hereof], relistingto'any matter which the
   Sectieteryof Stete has authority by this Act .to
   consider or investigate, and for this purpose
   the Secretary of St&te may sign subpoenas, ad-
   minister oaths and efflrmations, examine wit-
   ne$s& and receive evidence, provided however,
   that.&11 Information;of every kind and nature
   contained therein shall be treated as confiden-
   tial by the Secretary of State and shell not
   be disclosed to the public except under order
   of court, but nothing in this section shallbe
   Interpreted to prohibit CIP limit the publiba-
   tion of rulings'or decisions of the Secretary
   of State, In case of disobedience of any sub-
   poena, 01"of ,tRecont~umaeyof any witness ep-
   pearing before the Seere,taryof State, the Sec-
   retary of State may invoke the aid of the Dis-
   trict Court within whose jurisdiction any wlt-
   ness may be found9 and such court may thereupon
   issue an order requfrirg the person subpoenaed
   to obey the subpoena or give evidence, 'or pro-
   duce books, accounts9 records, papers, and cor-
   respondence touching t’he mat.ter in question,
   Any failure to obey such,order of the court may
   be punished by such court,es e contempt thereof.
          "The Seoreterg of State may In any in-
    vestigation cause the deposition of witnesses
    residingwithin OP without the State to be taken
    in the-manner prescribed 'fordepositions in
    civil actions under the laws of Texas,
.   -

        Honorable Wm. J. Lawson, page 5          O-3367

                  By the terms of Article 4340, Revised Civil Statutes,
        as amended by the 40th Legislature, 1927, the office?of Assis-
        tant Secretary of State is created, and such Assistant is author-
        ized to "perform all the duties required by law to be performed
        by the Secre%ary of State when thensaid Secretary of'Sta.te"is
        absent or unable to act for any reason. Such Assistant shall per-
        form such other duties as shall be required of hlm,bg,the Sec-
        retary of State and his compensation shall be $4,000,00 per
        annum."
                  The proper construction of these statutes requires
        the holding that no person fs authorized to hold the hearings
        mentioned in the Securities Act except the Secretary of State
        and the Assistant Secretary of S%a%e.
                  It is elementary law that a public officer may no%
        delegate to another the authority to perform those offlclaS duties
        involving official discretion, which have been imposed upon'him.
                                                                     ,,
                  Where, ashere, there 15 a deputy offfcer or assistant
        who"is clothed with the power to perform the duties of his prin-
        clpal, such deputy or assistant does not perform such duties by
        virtue of any principle bf delegation of powers, but in hisown
        right in virtue of the same authority Investing his principal
        with power --'tha% is, the Legislature,
                  'Pfefferv, Mahnke, 260 3-W. 1033, by our Supreme Court,
        definitely settles thfs questfon, It is there said:
            .,
                  'The service of the secretary of State
            and the comptroller on %he board of education
            is the performance by each of a duty attached
            by the statute to the office held by each.
            The duties are no% personal, They are dutfes
            attached to the offfces, Any holder of the
            office of secretary of s%e.teor comptroller
            must serve as a member'of the board of educa-
            tion as a part of the duties of those offices
            respectively. S,incethe statutes provide that
            the chief clerks may respectively perform the
            duties attaching to those offices, the chief
            clerks'may, in the contfngenctes mentioned in
            the'~
                statutes, perform the pa~ticu1a.rduties
            attaching to the offices of secretary of state
            and comptroller by vfrtue bf the statu%es mak-
            lng them'members of the board'of educatfon.
            In such cases the chi'efclerks"do not perform
            those duties by delegation of authority from
            their chiefs. They perform them by vfrtue"of
            authority of the Legislature in the same way
                                                                        -   .

Honorable Wm, J. Lawson, page 6           o-3367

    that their chiefs are authorized to perform
    them. The Legislature could have provided
    that, in the absence, etc,, of the secretary
    of state and comptroller, the chief clerks of
    either 6~ each should be members'of the board
    of education. The Legislature has done the
    same thing In a different way by prescribing
    that the chief clerks provided by statute
    shall~and may, in the absenc,eof the secretary
    of state and the comptro'ller,performthe ,du-
    ties of those officers, among which are duties
    arislng from their membership on the state -~
    board of education, Thus the chief clerks are
    officers provided by statute, and authorized
    by statute, to perform the duties attaching to
    the~officers of secretary of state and comptrol-
    ler, making those officers members of the board
    of education. The full authority of the chief
    clerks thus to act arises from the aces of the
    Legislature Investing them with such au%horlty
    when the contingencies mentioned in the statu-
    tes arise. There Is no delegation of authority
    to the chief clerks by the secretary of state
    and'the comptroller. In trzr.tS,k
                                   and in fa,ct,,
                                                the
    secretary of state and the comp%roller are impo-
    tent to prevent the chief clerks from thus per-
    forming the duties of those offices in the eon-
    tingencies of the statutes authorfzing them %o
    act e The chief clerks have ,thesame authority
    to perform the duties of %hose offices in those
    contingencies that the secre,%aryof state and
    comptroller have to perform them at all other
    times - the authorfty of the Legislature, The
    chief clerks are public officers fn the same
    sense and created by the same legal aythority
    as other statutory officers of state.
             The word “hearing”,   as used in the Securities Act, and
as used in this opinion,      contemplates that proceeding wherein
evidence Is heard and considered by the officer clothed with the
power of decision, and .wherethe finding or decision is made by
that officer and no% anothe:r. It does not necessarily exclude
the ministerial or admInistrative ald of others in the assembling
of testimony    for the consfderation of the officer clothed with
dupisdiction %,cf  hear, but the judicial~conception of the word
 heartng" necessarily requires that that officer must consider
the testimony, make his findings thereon, and render his order,
judgment or decree in respect the matter in confroversy.
          Chief Justice Hughes, In the case of Morgan v. United
States, has writden what may well be considered the last Word
Honorable Wm. J. Lawson, page 7       O-3367

upon that subject. He says:
         “A proceeding of this sort requiring the
   taking and weighing of evidence; determinations
   of fact based upon the consideration of the
   evidence, and the making ,o’fan order supported
   by such findings, has a quality resembling that
   of a judicial’proceeding. Hence it Is frequently
   described as a-proceeding of a buasl-.iudlcial
   character. The reauirement of a 'full hearing' '-
   has obvious reference to the tradition of ‘jud?cial
   proceedings in which evidence’is received and
   weighed by the trier of the-facts. The ’hearing ’
   is designed to afford the safeguard that the one
    who decides shall be bound in good conscience
   to consider the evidence, to be guided by that
   alone, ,and to reach his conclusion uninfluenced
   by ex%raneous"consldera%ion which in other fields
   might have play in determining .purely executive
   action. The ‘hearing’ Is the hearing of evi-
   dent8.and argument e If the one who determines
   the facts which underlie the order has not con-
   sidered ,evldence~or argument, It is manifest
   that the hearing has no% been given.
         “There is thus no basis for the contention
   that the"'authorityconferred by B 310 of the
   Packers and Stockyards Act is given to the De-
   partment of Agriculture, as a department in the
   administrative sense, so that one official may
   examine evidence, and anotherofficial who has
   not cbnsLdered the evidence may make the find-
   ings and order. 'In such a view, it would be ."
   possible, for example, for one official to hear
   the evI.denceand argument and arrive at certain
   cbnclusions of fact, and another official who
   had not heard or consIdered either evidence or
   argument to overrule those conclusions and for
   reasons of policy to announce entirely different
   ones. It is no answer to say that the question
   for the court"is whether the evidence supports
   the findings and the findings support‘the order.
   For the wefght ascribed by the law to the find-
   ings -- their conclusiveness when made within
   the sphere of the authbrlty conferred -- rests
   upon the assumption that the officer who makes
   the findings has addressed himself to the
   evidence and upon that evidence has conscien-
   tiously reached the conclusions which he deems
   it to justify. That duty cannot be performed
Honorable Wm. J, Lawson, page 8                o -3367

    by one who has no% considered evidence or argu-
    ment. It is no% an impersonal obligation. It
    is a duty akfn to that of a judge, The one who
    decides must hear.
          "This necessary rule does not preclude
    prac%lcable,administra%ive procedure in obtal.n-
    ing the aid of assistants in the department.
    Assistants may prosecui:einquiries. Evidence
    may be taken by an examiner, Evidence thus
    taken may be sif%ed and analyzed by competent
    subordinates. Argument msy be oral or written.
    The requirements are not technical. But there
    must be a hearing in a substantial sense. And
    to give the substance of a hearing; which is
    for the purpose of making determinations upon
    evidence, the officer who makes the determina-
    tions must con~tiderand appraise t'heevidence
    which jus%ifZes t.hem, T!-d duty c;ndoubtedly
    may be an or.ePousone, b;~'?
                               the performance of
    it in a subsfan?:lalmanner is inseparable from
    the exercise of the importai:;i,
                                  aut"lori%ycon-
    ferred.
            "+ * x *"'I s/z98I,T.
                                s.   468)

                               Very truly yours,
                               ATTORNEY GENERAL OF TEXAS

                               By s/Ocie Spee:?
                                    Ocie Speer
                                    Assis%ant
OS -MR-WC
APPROVED APR 12, 3.941
s/Glenn R, Lewis
(Acting) ATTORNEY GENERAL OF TEXAS
Approved Opinion Comml.t%eeBy s/MB          Chai:rman