323 P.2d 705 | Nev. | 1958
By the Court,
Petition for a writ of review to review the action of the State Board of Finance of the State of Nevada, which approved the action of the superintendent of banks denying the application of the petitioner herein for a license to conduct a banking business within the state. The board denied the application (1) because Henry Giróla, as the main organizer of applicant, by reason of his financial dealings in connection with customers and stockholders of American Credit Corporation and Bankers Trust Company, had conducted the affairs of those corporations in a manner reflecting on his business ability and on his intention to carry out his promises with individuals in connection with the sale of securities to them, and particularly because his failure to carry out such promises was not one to inspire confidence, NRS 659.050, 2(d) ; (2) because the men named as directors of petitioner have not sufficient knowledge of the operation of a bank to inspire confidence from the public in the operation of such bank, id.; (3) because a total of five banks operating in the city of Reno adequately served the public, id. (f) ; and (4) because of the situation under which the president and manager of the proposed bank demanded and was given- a guaranty by the stockholders of a 5-year employment at a salary of not less than $15,000 per year. The
Petitioner, while conceding the rule that such boards are not bound by the strict rules of evidence and may accept hearsay testimony, insists that the board’s ruling may stand only if supported by “substantial” evidence, and that this may not be supplied by hearsay alone, citing 42 Am.Jur. 467, Public Administrative Review, sec. 132. It insists that if we delete the evidence of a hearsay nature there is a lack of any substantial evidence upon which the board could have predicated its findings. We may concede for the purpose of this review that if the record contained nothing but hearsay evidence, the contention that it lacked sufficient substance to support the order might be sustained. Indeed a very large proportion of the evidence adduced consists of letters written by individuals to the superintendent of banks complaining of the actions of Giróla in the sale of common stock, preferred stock and bonds of American Credit Corporation and Bankers Trust Company. This promotes the thought that as the persons writing these letters were all residents of the state, it should have been a comparatively simple matter to produce at least a few of them as witnesses and to take the depositions of others. This, counsel for the board apparently considered either unnecessary or inexpedient.
The letters referred to were from a large number of persons complaining that Giróla had sold them stock and bonds amounting to many thousands of dollars with the assurance that he would at any time on 90 days’ notice (in some cases 60 days and in some 30 days) pay them back their money for their stock or bonds and that they would receive regular dividends; that when they requested their money they were put off in various ways; that after a time Giróla failed even to acknowledge receipt of repeated letters from them. Other letters from responsible attorneys in the state were to the effect
We turn then to the record to see if it contains substantial evidence as to the unfitness of Giróla to inspire confidence in his role as organizer of the bank and the owner of 42.6 percent of its stock.
Grant L. Robison, state superintendent of banks, testified concerning his audit of the books of the American Credit Corporation (controlled and managed by Giróla) and particularly its balance sheet as of January 31, 1952. This corporation was at the time subject to supervision of the superintendent of banks. Mr. Robison submitted a balance sheet as of January 31, 1952 as recast by his department. The statement as made by the corporation showed a surplus of $73,590.02. Mr. Robison testified that he had eliminated a number of items which he considered were worthless assets. The result was, not a surplus in any sum, but a capital impairment of $244,-455.25. He testified in detail as to each item that he had eliminated. He struck out an item of $113,058.68 in bad loans, as well as $44,245.64 accrued interest on these loans, which had never been collected, although in arrears for long periods of time. He struck out an item of $17,404.64 expenses incurred over a period of years for collection of accounts, repossession expenses and attorney fees; also $4,500 good will and $27,092.56 organization expense and $96,386 commission on sale
The superintendent of banks further offered in evidence what appears to be a photostat copy of a certified copy of a judgment of the District Court of the United States for the Northern District of the California Southern Division in the case of the United States v. Henry Giróla, adjudging the defendant guilty upon the verdict of a jury on a charge of violation of the federal internal revenue act with a judgment of imprisonment in a county jail for one year with $273.50 costs. The defendant was placed on probation. The record included photostat copies of the grand jury’s indictment and other papers. The petitioner contends that the proceedings in the federal court showed no act of Giróla involving moral turpitude but simply a dispute between Giróla
The superintendent of banks further offered in evidence a photostat copy of a report of the auditor of the Securities Exchange Commission, addressed to the assistant commissioner of the Los Angeles office of the Securities Exchange Commission, with reference to the application of Consumers Discount Company for the sale of its stock. This report contains 11 pages of single-spaced typewriting and contains a “chart indicating the organization of the Giróla companies which should give a visual picture of the various corporations in the group controlled by Henry Giróla and associates.” These companies include Italian Bond & Share Corporation, Continental Credit Company, Giróla Bros., Italian-American Securities Corporation, Italian Investment Corporation, Italian National Building & Loan Association, Newcastle Building & Loan Association, State Building & Loan Association and other building and loan associations. These are characterized in various ways, such as “securities and brokerage,” “finance company,” “parent and holding company” etc. Other companies named are Continental Seaboard Corporation, Seaboard Equities Inc., Reserve Building & Loan Association etc,. The report discusses these various corporations in detail. A few of the findings may be noted. A consolidated statement of Italian Investment Corporation and certain subsidiaries which showed a surplus resulted upon examination in a deficit of $169,559.85. It continued to sell its shares to the public through 1930, but permission to sell further shares was suspended for failure to file proper reports despite repeated requests for additional information. The permit of the Italian Bond & Share Corporation was suspended in 1931 on account of
The report continues: “After the suspension of the permits of Italian Investment Corporation, various attempts were made by the Girólas to obtain authority from this division to sell and issue shares to the public * * * [T] he Girólas apparently believed that a permit might entitle them to raise more capital from the public * * These included the Continental Seaboard Corporation to take the place of Italian Investment Corporation as the parent company; Seaboard Equities Inc. as a subholding corporation; Continental Share Corporation Ltd., the brokerage company for the new group; and Continental Credit Corporation as the operating finance corporation of the group. An involuntary petition in bankruptcy was filed against Continental Seaboard Corporation and a voluntary petition in bankruptcy by Seaboard Equities Inc. in June 1932. Salaries and expense accounts were drawn by the Girólas from 1929 to 1932, inclusive, in excess of $100,000. Consumers Discount Company was organized in November 1932 “after the collapse of the Continental Seaboard Corporation and its subsequent bankruptcy.”
When this record was offered in evidence an objection was made as follows: “We object to that because it is not related to inspiring confidence of the people in Nevada at all.” Mr. Robison stated: “* * * my purpose in bringing out all of this is to show the type of operator Mr. Giróla has been for many, many years and certainly not the type who should be in the banking business * * *.” The relevancy and materiality of this evidence is apparent on the issue under the statutory requirement that the personnel of the organizers of the corporation be such as to inspire confidence. It may be contended that this report is hearsay, a contention which we need not determine. However, it was an official report
As to the objection that the evidence is not related to inspiring confidence “of the people in Nevada,” we do not consider the distinction material. Even if reputation could be said not to follow a person across a state line, the character would remain with the person no matter how many state lines were crossed. We think that the statutory requirement that the personnel of the organizers be such as to inspire confidence was a broad requirement for character rather than for reputation.
The original articles of incorporation of Citizens Bank of Nevada named Henry Giróla as president. In the amended articles he does not appear as president or as a director. Petitioner contends that the objections of the superintendent of banks and the State Board of Finance to the character and operations of Henry Giróla personally are objections to him as a stockholder, owning 42.6 percent of the stock of the proposed bank, and that objections to a stockholder are not within the purview of the statute. It is true that the superintendent of banks noted: “* * * Mr. Henry Giróla is listed as the owner of stock in the amount of $64,000, which is 42.6 percent of the total issued. Purchase by him of only 7.5 percent additional stock would give him complete control.” It is also true that the Board of Finance found: “That Henry Giróla is one of the original incorporators of said corporation, and at the present time is the owner of 42.6 percent of the total issued and outstanding stock; * * *.” However, the controlling finding of the board was: “That under the evidence, as appears from the record of the proceedings, the board finds that Henry Giróla was and is one of the organizers of said bank, and has participated actively in the sale of stock of said corporation, and in directing the affairs of said
Petitioner’s allegation that respondents, in denying petitioner a certificate, acted in an arbitrary, unreasonable and capricious fashion is not supported by the record.
Being of the opinion that the record contains substantial support of the board’s order affirming the order of the superintendent of banks denying to petitioner a certificate to transact a banking business in the State of Nevada, and substantial support for its conclusion that the superintendent of banks was not in error in his said reason for such refusal, as herein discussed, NRS 659.-060, subd. 2, it becomes unnecessary to pass upon the othér reasons assigned for his action.
The order of the board is affirmed.