Honorable J. M. Falkner Opinion No. C-573
Banking Commissioner of Texas
John H; Reagan Building Re: Where the by-laws of a
Austin, Texas 78701 depository provide for the
assessment of a charge
against the account of a
shareholder who falls to
Increase hi6 share.balance
to a minkmum of $5.00 and
the aseeaement of e&i
charges absorbs such accounts
within 10 month8 is the .
account subject co escheat,
as a dormant or Inactive
account, under Article ,3272b,
Dear Mr. Falkner: V.C.S.?
Your recent letter requesting the opinion of this
office on the above captioned matter reads aa follows:
"This Department~haa before it for further
consideration a standard by-law provlalon, pre-.
vloualp approved by this Department and in operation
in a slightly different form, by which certain
Depositories under the supervision of the Depart-
ment of Bank&g have been absorbing account8 of
lese than five iiollars ($5.00).
"Sin& Article 3272b, V.C.S., has become
generally applicable to such Depositories, the
Department of Banking is not nure whether amounts
80 absorbed within ten (lo) months aye nevertheless
subject to Escheat by the State of Texas.
"In view of the above your opinion is
respectfully requested to &he following question:
"Where each of a class of Depositories,
authorized by State Law, has had atandard by-laws
which have provided for levy of charges against
a shareholder for failure, wltNn.prescrlbed periods,'
-2769-
Hon. J. M. Falkner, page 2 (C-573)
to Increase his share balance to a minimum of
five dollars ($5.00), a8 required of each bhare-
holder by the by-laws and the contradt between
the shareholder and the Depository ,areeuch
charges when made In accordance with the by-laws
and contract In less than one year after the
original payment on the share deposit by the
shareholder aubJect to Escheat to the State of
Texas as a :dormant deposit' or 'Inactive account'
under Article 3272b, Revised Civil Statutes of
Texas?"
While your letter Is not specific as to the particular
type of depository with which you are concerned, we preaume'that
such depositories are organized and function pursuant to some
form of corporate charter.
Corporation8 are privileged to exist and function solely
by virtue of sovereign authority. Raving been brought lrito
being by the State, their rights and powers are preac?lbed bg
the State. Brennan v. Weatherford 53 Tex. 330 (188C
Frank Co. v. Latham 145 T 30 193 S W 2d 671 (194&%%
Brewing Co. v. Curtis, ~6~::~.2;i 853 (+ei.Clv.App. 1938 7
history), The statutes which authorize the creation of Corpora-
tlons ordlnarlly provide that they may adopt by-lawe for the
purpose of prea&lblng rulea for conducting-the affairs of the
corporation. See for example Article 342- 403 Texas Banking
Code of 1943; Article 2466 Veinonts Civil Statutes. However
by-laws of & corporation n&t be consonant with the constitution,
statutes and public policy of the sovereign and corporate by-laws
which are In conflict therewith must, to the extent of such confll.ct,
be held Invalid. Staacke v. RoutledRe, 111 Tex. 489; 241 S.W.
994 (1922); International Travelers' AssIn v. Francis, 119 Tex.
1, 23 S.W.2d 28 (19 0) Kerbs v. California EiaaternAirways 33
Del.Ch. 69, 90 :.2d 6352'(1952)
; W ebb v. Morehead, ,251 N .C . 544,
111 S.E.2d 586 (1959).
Public policy finda Its ultimate expreeeion In the
statutes and constitution of the state. Order of Odd Fellows v'.
Jones 138 Tex. 537, 160 S.W.2d 915 (19421; Qossett Hamilton
rsIWi2d 297 (Tex.Clv.App. 1939, error dim., judgent correct).
And, within the llmltatlone prescribed by our constitution, It
is the prerogative of the legislature to enunciate, reshape and
change public policy. Scarborough v. Payne, 198 S.W.2d 917
(Tex.Clv.App. 1947, error ref.).
-2770-
Hon. J. M. Palkner, page 3 (c-573)
In furtherance of Its prerogative the 57th Legislature
enact& Article 3272b of Vernon's Civil Statutes and therein
provided for the escheat of "dormant deposits" and "lnabtlve
accounts" 86 defined In Section l(b) of Artiole 3272b, which
providea:
"b . The terms 'dormant deposits' and 'inactive
accounts' mean those demand, savings or other
deposits of money .or Its equivalent In banking
practice Including but not limited to aura due on
certlfle& checks dividend8 notes accrued interest,
or other evldenc& of Indebtedness: held by a
depository for repayment to the depositor or
creditor, or his order, which on or after the
effective date of this Article have contlnuou~sly
remalped Inactive for a period of'more than one
(1) y&ar without credit or debit whatsoever through
the act of the depositor, either In person or
through an authorlzed,agent other than the depository
Itself. 'Dormant depbslts' and 'Inactive acoounta'
lose their status aa such when ~8 deposit Is made
by the depositor, or a check Is drawn or wlthdpawal
in made therefrom by such depositor, either In
peraon or through an authorized agent other than
the depository itself."
It,Is to t~hosedeposits and accounts falllng~~w1thl.n
the
-. scope of
- .thia
_ .. _. .that the force
definition _ of
- the
_ Statute.
-. is
-._
directed. Under this crlterla any actlon or a aeposltory wltn
respect to a deposit or~accoun& is to be disregarded and we must
look solely to'the '- _ .act of the dewsltor- either in neraon I
or through-an authotiizdd-agentother t&n the'deposltory itself"
to determine whether a deposit or account Is dormant or Inactive.
(Emphasis added). The contention that an account or~deposlt never
becomes "dormant" or "Inactive" If the depoaltory has, pursuant
to its by-law@, absorbed such deposit or account In less than
one year simply Ignores the plain language used by the Legislature
in Its definition. Id .our opinion, the Legislature deliberately
drafted this definition 80 aa to speclflc&lly preclude the
poeslblllty that deposits and accounts could be removed from
the operable effect of Article 3272b by a depository which
abeorbs such accounts through the assessment of aervlce.chargeti,
fines, penalties or other charges. All deposits and accounts
remain subject to escheat even though they may~have been absorbed
by asaessmenta which were levied within the first year of
Inactivity.
-2771-
Hon. J. M. tilkner, page 4 (C-573)
Our conclusion In this regard I.8supported by the fact
that Section 2,,ofArticle 3272b makes It unlawful for anp
depository to .tranafer, convert or reduce any dormant
deposit or lnac&ie account to the profits or assets of the
depository; either through book transfers, assessments,service
charges or any other procedure ao long aa the deposit or account.
remains in a dormant or Inactive stata&. . . ."
We wish to make It clearly understood that we do not
hold that a by-law such as the one in question ls.lnvalld per oe,
but we do hold that, Insofar as the operable effect of the by-law
would apply to reduce or absorb deposits or accounts which In
the absence of such charges fall within the scope of Article
3272b such by-law conflicts with public policy and Is Invalid
to this extent. Therefore you are hereby advised that once a
deposit or account, witho& taking into consideration any service
charge, fine or penalty which may have been assessed against It
by the depository becomes dormant or Inactive under the terms
of Section l(b) of Article 3272b, and remains in such statue
for the period prescribed by said Article, the amount of such
deposit or account as of the beginning of the period of l~ctlvlt~,
less any charges specifically authoi%zed under Article 3272b, :
Is subject to escheat. However, If, at any time prior to the
.dellvery of a dormant deposit or inactive account to the.State
Treasurer, such deposit br account, by reason of the action of
the depositor, either in person or through amauthorized agent
other than the depository Itself, ceases to be dormant or inactive,
Article 3272b would not preclude the depository from aaseaslng
the charge, fine or penalty prescribed by its by-laws.
SUMMARY
Service charges, fines or penalties assessable
against a deposit or account under the by-laws
of a depository are not to be considered In deter-
mining whether a deposit or account Is dormant
or Inactive within the meaning of Section l(b) of
Article 3272b Vernon18 Civil Statutes and the
entire deposli or account as of the b&ginning of
the period of Inactivity 'leas any charge specifically
authorized by Article 32?2b, Is subject to eacheat
under such Article. However, should a deposit nor
account cease to be dormant or Inactive by reason
of the action of the depositor, either in person'
-2772-
_. -
. .
Hon. J. M. Falkner, page 5 (C-573)
or through an authorized agent other than the
depository Itself prior to the delivery of such
deposit or account to the State Treasurer, Article
3272b, Vernon's Civil Statutes would not preclude
the levy of the charges prescrlbed by the by-laws
of the depository.
Very truly yours,
WAQGONW CARR
Attorney General
Assistant
wos
:mi
APPROVED:
OPINION COMMITTEZ
W. V. Qeppert, Chairman
Wade Anderson
Roy Johnson
John Pettlt
APPROVED FOR TRE A'l'lQRNEY
GENERAL
By: T. B. Wright
-2773-