THE .LTJXBRNEY GENERAL
OP%-JKXAS'
The Honorable Jerry (Nub) Donaldson Opinion No. H- 723
Chairman, Financial Institutions Committee
House of Representatives Re: The effect of section 6.14
State Capitol Building of the Texas Savings and
Austin, Texas Loan Act upon the author-
ity of political subdivi-
sions to invest surplus
funds in savings and loan,
Dear Representative Donaldson: associations.
On behalf of the House Standing Committee on Financial Institutions you have
asked:
In view of Section 6.14 of the Texas Savings
and Loan Act (Art. 852a R. C.S.), are there any
restrictions upon the authority of political sub-
divisions of this state to invest surplus funds in
savings accounts fin savings and loan associations
operating in this state?
The Texas Savings and Loan’Act provision to which you have referred contains
very broad language, It reads in part:
Administrators, executors, guardians, trus-
tees and other fiduciaries of every kind and
nature: counties, cities, towns and all other
political subdivisions or instrumentalities of
this State; insurance companies doing business
in this State; business and nonprofit corpora-
tions; charitable or educational corporations
or associations; banks,, credit unions and all
other financial institutions are hereby speci-
fically authorized and empowered to invest
funds held by them in savings accounts of any
association operating under this law or any
Federal association. . . .
p. 3094
The Honorable Jerry (Nub) Donaldson, page 2 (H-723)
If applied in its most comprehensive sense. the foregoing language would
authorize fiduciaries, trustees, and public officers to invest the funds
entrusted to them in savings and loan association savings accounts without
regard to limitations imposed by the Texas Probate Code, the Texas
Trust Act, or laws governing the selection of depositories for public monies.
However, we do not believe that result was intended nor that the provision
can be given that effect.
On January 1, 1964. the Texas Savings and Loan Act, article 852a.
V.T.C.S.. succeeded and replaced former article 881a which governed
building and loan associations (Acts 1963, 58th Leg., ch. 113, p. 269). The
title of the bill enacting the new law provides:
An Act arranging the Statutes of this State
affecting savings and loan associations and their
operations in appropriate Chapters and Sections
into a consistent whole and under a single Act;
defining certain terms; providing a method of
forming associations; stating the powers, duties
and qualifications of directors, officers and
members of such associations; fixing the cor-
porate power thereof; regulating the loans,
investments and ownership of real property by
such associations; providing for. savings accounts
and fixing rights and obligations in regard thereto;
providing for the computation of earnings, trans-
fers to loss reserves. dividends and surplus of
such associations; providing for the supervision
and regulation of such associations, their books
and records, accounting practices, statements,
reports. audits and examinations: providing for
discontinuance of violations and receivership;
limiting the rights of foreign associations to do
business as a savings and loan association in this
State; providing for conversion into Federal
associations; providing for conversion into State
associations and reorganization. merger, con-
solidation and voluntary liquidation of such
associations; exempting savings accounts from
p. 3095
The Honorable Jerry (Nub) Donaldson, page 3 (f-I-723)
securities laws: authorizing acknowledgements
to be taken before members and employees of
associations who are notaries public; providing
for closing of places of business; permitting
associations to act to avoid losses; providing
for fees to be collected by savings and loan’
commissioner: requiring all associations
authorized to conduct a savings and loan busi-
ness to conform to this Act; providing that
outstanding shares. stock, share accounts and
investment certificates (except Permanent
Reserve Fund Stock) shall be considered as
savings accounts; prohibiting the issuance of
stock or shares not authorized by this Act:
providing for ad valorem taxation of the
property of such associations; permitting
rule-making procedures to be instituted under
certain conditions: providing hearing pro-
cedures; providing for judicial review: pro-
viding penalties for slander of an association,
embezzlement, declaring greater dividends
than earned, failing to comply with law. sup-
pressing evidence and disclosures by examiners:
repealing all laws in conflict herewith; providing
for severability of the different Chapters or
parts of Chapters so that the unconstitutionality
of one or more shall not affect the remainder of
the Act; providing an effective date: and
declaring an emergency.
There is no indication contained in the title of such a sweeping change in the
law regarding the investment of entrusted funds as the above-quoted language
from section 6.14 of the Act would imply. Furthermore, that section of the
Act, contains this additional language:
If upon the effective date of this Act the
shares and share accounts of associations
operating under Article 881a of the Revised
Civil Statutes of 1925, as amended, are legal
p. 3096
The Honorable Jerry (Nub) Donaldson, page 4 (H-723)
investments for any particular business,
organization. corporation, fiduciary or
political subdivision, the savings accounts
of associations subject to terms of this Act
shall be deemed to be legal investments to
the same extent as such shares and share
accounts.
This last sentence of section 6.14 could perhaps be given an interpretation
consistent with a broad construction of the earlier language, but a statute
s h ou 1 d’ b e c o n s t rue d in a manner that will render it constitutional, if
possible. 53 Tex. Jur. 2d Statutes 5 158. A broad interpretation of the sec-
tion 6.14 language would cause the title of the enactment tb be misleadingly
narrow and, in our ooinion. unconstitutional. Tex. Const. art. 3.-_ 6 35:
C. Haymon Construction Company v. American Indemnity Co., 471 S. W. 2d
564 (Tex.Sup. 1971; Harris County Fresh Water Supply District No. 55 v.
Carr, 372 S. W. 2d 523 (Tex. Sup. 1963); 53 Tex. Jur. 2d Statutes 5 59.
In our opinion, section 6.14 of article 852a. V. T. C. S., was meant -
and should be construed - only to signify that after passage of the Act
savings accounts in savings and loan associations would be legal investments
for those fiduciaries and public bodies permitted by other law to invest in
similar securities. See ed. V. T. C. S. arts. 836 and 6243~5 23; Prob. Code
$389; but see V. T. CT arts. 2544 et., 2559 et se% We do not believe
the provision, in itself, gives any political subdivision a power to make
investments unaffected by legal restrictions found elsewhere in the law of
this State.
Accordingly, we answer your question in the affirmative. Without
examining the entire body of law relative to financial transactions by all
the various types of political subdivisions, it is impossible for us to
specify all legal restrictions which might apply to the investment authority
of such entities, but we call to your attention article 3, section 52 of the
Texas Constitution, and the statutes previously noted.
p. 3097
The Honorable Jerry (Nub) Donaldson, page 5 (H-723)
SUMMARY
Section 6.14 of article 852a, V. T. C.S., the
Texas Savings and Loan Act, does not authorize
political subdivisions to invest in savings accounts
of savings and loan associations without regard to
leeal restrictions found elsewhere upon the disposi-
tion of public monies.
Very truly yours,
Attorney General of Texas
APPROVED:
DAVID M. WNDALL, Fir& Assistant
Opinion Committee
p. 3098