## Facts

- The Texas Savings and Loan Commissioner denied an initial application to charter Citizens Security Savings and Loan Association in Borger, Texas.
- In the roughly one-month interval after the denial and before refiling, five organizers met privately with the Commissioner to discuss correcting the application and economic conditions.
- The organizers then submitted a second charter application that differed from the first, including new organizing members, a new fee, new public notices, new funds on deposit, and a new proposed location.
- The Commissioner treated the second filing as a new application, developed a separate administrative record, and granted the charter.
- At the hearing on the second application, the Commissioner disclosed the private meeting and testified his decision rested solely on the record of the second proceeding.
- First Savings and Loan Association of Borger, an existing institution, challenged the charter grant, arguing the private meeting was an improper ex parte communication that prejudiced it.

## Issues

1. Whether the Commissioner’s private meeting with Citizens’ organizers between the denial of the first application and the filing of the second required setting aside the charter grant as an improper ex parte communication.
2. Whether prejudice to the opposing party may be presumed from the existence of an ex parte contact, or instead must be shown under the harmless-error standard.

## Decision

- The Texas Supreme Court reversed the court of civil appeals and left in place the Commissioner’s order granting the charter.
- The Court rejected the intermediate court’s presumption that the private meeting necessarily harmed First Savings and Loan.
- The Court held that First Savings and Loan failed to show the meeting probably affected the outcome or caused the rendition of an improper judgment.
- The Court accepted the Commissioner’s treatment of the second filing as a new application supported by a separate record.

## Legal Principles

- In judicial review of Texas administrative action, a procedural error warrants relief only if it probably caused the rendition of an improper judgment or probably affected the outcome.
- Ex parte contacts in an administrative setting do not automatically invalidate an agency order; the challenger must demonstrate actual prejudice.
- Where an agency decision is supported by the formal record and the challenger cannot connect the claimed irregularity to an adverse effect on the decision, reversal is not justified.

## Conclusion

The Texas Supreme Court held that, even assuming the private meeting was improper, the charter grant could not be set aside without proof that the ex parte contact probably affected the Commissioner’s decision; prejudice could not be presumed.


Vandygriff v. First Sav. & Loan Ass’n, 617 S.W.2d 669 (Tex. 1981)