Case Information
*1 GENERAL THEA ORNEY 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 inay the 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,"'Regular Session, 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 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 ahoulsl be 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 *2 Honorable Wm. J, Lawson, page 2
individual to preside over and conduct such hearings.
"In the event that you should answer thls'questlon that the-Securities CommLssion- 6r inay conduct 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 woiild als'b appreciate 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 kidministration of the praviijions of 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 rulling or de- cision of the SecFetarg of.'Stat&; m&g filki withyn t&n (10) days thereafter'an appllbation for a hearing before the, ecFetai?y of State tiho,shall, within teii (10 7 'days~'after"the re- beipt of siich epPllci%tion s&t sald~'hearlhg for fiXand shall such tline and plade as he ma give skid apfllicant ten (10 7. days' notlce of such hearing.
Section 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"etary of State a'llst of""seburitles which h‘e has 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 &eiiurlttes oti ia.&ue or publish within thie State-'any circular, ".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 *3 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;,,et least seven (7) days prior there- to.
Section 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: *4 Honorable Wm. J, Lawson, page 4
"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,~whFch copies shall be verified by affi- davit of an officer of such concern and shall be admissible in evidence as Provided in Section hereof], relisting to'any matter which the Sectietery of 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 ,tRe cont~umaey of any witness ep- pearing before the Seere,tary of 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 'for depositions in civil actions under the laws of Texas, *5 -
Honorable Wm. J. Lawson, page 5
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 then said 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,
'Pfeffer v, Mahnke, 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.te or comptroller must serve as a member' of the board of educa- tion as a part of the duties of those offices respectively. S,ince the 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.r duties 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'ef clerks"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,e of 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 ,the same authority to perform the duties of %hose offices in those contingencies that the secre,%ary of 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 .where the 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 *7 Honorable Wm. J. Lawson, page 7
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’f an 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- dent 8. 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"'authority conferred 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.dence and 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 *8 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:e inquiries. 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~tider and appraise t'he evidence which jus%ifZes t.hem, T!-d duty c;ndoubtedly may be an or.ePous one, b;~'? the performance of it in a subsfan?:lal manner is inseparable from the exercise of the importai:;i, aut"lori%y con- ferred.
"+ * x *"'I s/z98 I,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%ee By s/MB Chai:rman