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The Attorney General of Texas
November 25, 1980
Mr. L. AIvis Viindygriff Opinion No. WV-278
Commissioner
Texas Savings and Loan Department He: Trust powers for stete-
P. 0. Box 1089 chartered savings and lcan
Austin, Texas 78767 associations
Dear Mr. Vandygriff:
You have asked several questions relating to the ability of a stete-
chartered savings and loan association to offer trust services. You indicate
that these questions have arisen as the result of e recent federal statute, the
Depository Institutions Deregulation and Monetary Control Act of 1980, Pub.
L. No. 96-221. This act authorizes the Federal Home Loan Bank Board to
permit federally chartered savings and &an associations to act as trustee,
executor, administrator, or guardian, or in any other fiduciary capacity in
which state banks, trust companies, or other corporations which come into
competition with the federal associations are permitted to act under the
laws of the state in which the association is located.
You first ask:
1. Does section I, article l513a, V.T.C.S., authorize
a state-chartered savings end loan association to
emend its articles of incorporation to offer trust
services?
There is no express statutory authority similar to that contained in the
recent federa law which authorizes state-chartered savings and loan
associations to offer trust services. The two Texas statutes dealing with the
subject are articles 1513a, V.T.C.S., and 852a, V.T.C.S., the Texas Savings
and Loan Act. Section 1, article 1513a, V.T.C.S., provides:
Except as provided by Section 6 of this Act, trust
companies may be created, and eny corporation,
however created, may emend its charter in
compliance herewith for the following purpose: to
act as trustee. . . and as sgent for the performance
of any lawful act. . . .
D. 888
Mr. L. Alvis Vandygriff - PageTwo @6V-278)
The exception referred to in section 6 covers foreign corporations and registered bank
hold@ companies, banks, or trust companies whose operations are principally
conducted outside of Texas. Other than those companies, section 1 does not prevent
any particular type of corporation from emend@ its charter to provide trust services.
To the contrary, the language specifically allows ann corporation, however created, to
emend its charter to offer trust services.
A stete-chartered savings and loan association is e corporation. See Brezosport
Seviws and Loan Association v. American Savings and Loan Association,342 SW. 2d
747 (Tex. 1961); Prudential Building and Loan Association v. Shaw, 26 S.W. 2d 168 (Tex.
1930); see also V.T.C.S. art. 852e, SS2.01-.12.
We believe that the language of section 1, article 1513e, V.T.C.S., is sufficiently
booed 90 as to include a savings and loan association as a corporation which may emend
its charter to offer trust services.
Although the Texas Savings and Loan Act, article 852e, V.T.C.S., does not
specifically address whether e state-chartered savings and loan association may
exercise general trust powers, section 4.01 thereof provides that an association shall
have the rights enumerated in the act and the rights and powers “incidental to or
reasonably necessary for the accomplishment of the objects and purposes of the
association.” Accordirg to section 1.03(21, the primary purpose of an association is to
promote thrift and home finencirg; the principal activity is the lend@ to its members
of money accumulated in savings eccounts of its members on the security of first loans
on homes and other improved reel estate. Other sections of the savings and loan act
indicate that the statute was intended to permit state-chartered savings and loan
associations to be able to compete effectively with federal associations. -Cf. V.T.C.S.
art. 852e, SS5.16, 6.20.
In order to fulfill its primary purpose, e state-chartered savings and loan
association must be able to exercise powers which allow it to compete effectively with
e federal association. We believe that the offering of trust services should be
considered an incidental power which helps to minimize any competitive advantages
that e federal association might have over state associations and thus eneblee the state
associations to fulfill their primary purpose. Because the Texas Savings and Loan Act
lacks an express prohibition egeinst offering trust services and includes a grant of
rights and powers incidental to the accomplishment of the purposes of the association,
we believe that stete-chartered savings and loan associations may utilize the
pmvisions of article 1513e to emend their corporate charters to offer trust services.
You next ask:
2. May such association earmark all or e portion of its
capital stock fund to meet the condition that a trust company
have a fully paid-in capital of et least $500,000, es required in
section 4 of article l513e, V.T.C.S.?
p. 889
Mr. L. Alvis Vandygriff - Pege Three (~lr-278)
Section 4 of article l513a provides as follows:
Any such company must have a fully paid-in capital of not less
than $500,000.
No provision of article 1513e explains or further describes the capital require-
ment. We believe, however, that the term “paid-in capital” is the same as “paid-up
capital” which is &fined ss “stated capital” in article 1302-1.02(2), V.T.C.S. The
definition of “stated capital” is found in article L02A(ll), Texas Business Corporation
Act, which provides:
(ll) “Stated capital” means, et any particular time, the sum of:
(a) the par value of all shares of the corporation having a
per value that have been issued,
fb) the oonsideretion fried by the corporation in the
manner provided by law for all shsres of the corporation
without par v&e that lmve been issued, except such
part of the consideration actually received therefor 8s
may hve been ellaeted to capital surplus in e manner
permitted by law, and
(c) such amounts not included in paragraphs (a) and (b) of
this s§ion as tWve been transferred to stated
capital of the corporation, whether rpcn the issue of
shares as e share dividend cr otherwise, minus all
reductions from such sum as hsve been effected in a
manner permitted by law.
We do not find any inconsistency between this provision and provisions of the savings
and lcen act, and therefore we believe that it swplements the savings and loen act.
See
- Bus. Corp. Act art. 9.14A.
Section 2.02 of article 852e, V.T.C.S., prescribes the only form or type of stock
that e state-chartered ssvirgs and loan association may issue, which is referred to as
“permanent Feserve ftmd stock” and is also tiwn as “capital stock.” See Attorney
General Opinion H-215 (19’74). To the extent that e savings and loan asso~tion has e
“stated capital” represented by its “permanent reserve fund stock” of et least
$500,000, we believe this meets the requirement of section 4 of article 1513e, V.T.C.S.
As this pmvision &es not require slrh ftmds to be designated or earmarked for this
purpose, we do not believe that a savings and loan association would be required to do
so.
You next ask:
3. Does a savings and loan association that has authority to
accept demand and time deposits purslrant to the Texas Savings
D. 890
,
Mr. L. Alvis Vfmdygriff - Page Pour (MY-278)
and Lcen Act, article 852e, V.T.C.S, forfeit its authority to
accept such deposits atce it begins to offer trust services as e
result of section 5 of article 1513e, V.T.C.S.?
Section 5 of article 1513e provides as follows:
Any such company shall not accept demand cr time deposits,
except as hereinabove provided.
The exception referred to by this section is contained in section 1, pertinent parts of
which are a5 follows:
. . .any corporation,however created, may emend its charter. . .
to act as trustee. . , and as agent for the performance of sny
lawful act, including the ri@ to receive depcsits made by
sgencies of the United States of America for the authorized
account of any individtel. . . .
We believe the purpose of section 5 is to prevent a corporation that &es not
Independently possess the powers to accept demand or time deposits from asserting
such power by virtue of the ecquisition of trust powers by complyhg with article l513e,
V.T.C.S. We believe that the acquisition of trust powers by e state-chartered savings
and loan association would mereIy be incidental to its operations, and thereby fall
within the ambit of section 4.01 of article 852e, V.T.C.S. The savings and lcan act
authorizes state-chartered associations to accept savings accounts. V.T.C.S. art. 852a,
SS6.01-.20. We do not believe that a statechartered savings and loan association that
emends its charter to acquire trust powers would surrender its authority to accept such
accounts or deposits therein
In your final question, you ask:
4. Does section 2(b) of article l513e, V.T.C.S., permit the
banking commissioner to authorize the savings and loan depart-
ment to conduct examination of trust departments of stete-
chartered savings and loan associetions?
The pertinent part of section 2(b), article l513e, provides as follows:
The Benkirg Commissioner of Texas shall have authority to
examine op cause to be examined each swh corporation
annually or more often if he &ems it necessary.
The savings and loan act also requires periodic examination of savings and loan
associations, and section 8.10 of article 852e provides that the savings and loan
commissioner shall examine or cause sn examination to be made into the affairs of
every association sdject to the act.
p. 891
,,
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Mr. L. Alvls Vandygriff - Pqe Five @V-278)
Therefore, if a state-chartered savings and lcen association elects to offer trust
services, then it is subject to examination by the bank@ commissioner as well as the
savings and loen commissioner et least of its trust operations. While each statute
authorizes the respective commissioner to ceuse Bn examination to be made, we
believe the language of the statutes would authorize e delegation of authority from
one commissioner to another. Although we believe that the banki& commissioner
could dalegete his authority to examine the trust departments et e savings and loan
association, there is no requirement that he do 9~. Section 2(e) of article 1513e
stijects trust companies to supervision by the banking commissioner; clearly, the
ultimate Fesponsibility for regulating trust companies rests with the banking
commissioner.
SUMMARY
A state-chartered savings and loan association may emend
its charter to offer trust services, es provided in article 1513e,
V.T.C.S. If the association’s permanent reserve stock fund is et
least $500,000, it will meet the $500,000 paid-in capital
requirement. The offering of trust services would merely be
incidental to an associetion’s authority to accept savings
eccounts, and therefore, the association would not lose its
ebility to accept such deposits. The state banking commissioner
would retain primary authority for examining trust departments
et such associetions.
MARK WHITE
Attorney General of Texas
JOHN W. FAINTER, JR.
First Assistant Attorney General
RICHARD E. GRAY III
Executive Assistant Attorney General
Prepared by Thomas M. Pollen
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Acting Chairman
Jon Bible
Rick Gilpin
Thomas M. Pollan
p. 892