, I
OFFICE OF THE AlTORNEY GENERAL OF TEXAS
AUSTIN
In emergoncl88 created thereby.
lnajor 8chOOley eala the 6welwJr8 OS
,oomeof our 6tatas ~wera wer-ridlug the map-
&tee of the Constitatlonmin regard to
bruwheo for Btate baakm aml he jut wonder-
ed If our own gweuwEent T88 QlOtheJfltith
euch outllorlty.
Honorable JuO. tie %GA&uks - pa@ 2
"Fhat we uuuld like to know is rmy l%xas
State chartcred banks yrovidc check paying,
deposit taldmg and exchange issuinq stations
in hilitary Hcscrvations and Navy Yard~.~
As vc cvnstruc your letter, it requests our
opinion upon the broad question stated In the captioned
subject matter -- chat Is, .tbc authority of a State bank-
in(5 corporati6n to eStabliSh a branch bank. As thus con-
strumi, the questim should bc ansvcreclin the negative.
Section 16 of hrtiolc SVI of the Constitution
reads 06 ~fofl~ns:
*The Legislature shall by general laws,
authorize the incorporation of corporate
bodIeswithbzuM.nganddiscountingprivi-
leges, and shall prqride for P eystem of
state supe.rvision, regulation and control
of such bodie6 which vi11 adequately pro-
tectand secure,the depositors sad credit-
ors thereof.
*PO such corporate body shall be char-
tered until all of the authorized capital
stock has been subscribed and paid for in
full in cash. Suoh bo& OorDorate shall
not be authorlssdto ema= @ business &
Kethnn one -which shall be~dee&g-
p 3dd)ln its c h a r ter” . l.* (mqlbsle cup-
.
The phrasing of your specific question quoted In
the last paragraph of your letter rith respect to the par-
ticular service of the setationss contemplated does not
call for 8 different answer. JIalntoining such gstatious*
would constltutc engaging *in business at more than one
places, with.ln the meaning of Seotion 16 of tho Constitu-
t1on.
Und& all Of the~deoisions throughout the United
States, the bueiness of rocepting deposits of'money for re-
payment upon the order of the depositor constitutes the
business of banklnq. It is perhaps the Only ueV3Pfriling
ind,loium of the banblng fuuOtiOns mnr that the authority to
issue ciroulatiry notes has been taken away from the Natlon-
al assoclatlons.
fiiomrablo Jolm Q. Lc~s&s - pa@ 3
The ordinary osscntial features of the banlbny
business are, the ;rowOr to accept dCpO6itE of money ro-
payable Lo the order of the depositor, the disc.ountinC
of coxmz0rcial paper, arvl the ~wernmental authority to
issue circula~Ang uGtO6, which last-nasff! power, as a?mvc
atoted, I?rrSLOCI1 zllrGgatc?d. .
Any hank may, vf course, perform other buslneso
transactions, axi cvcn carry on to a degree other busi-
nesscs, not cssentislly hanki~lg functions, when reasonably
neocssary as an incidental power to perform: their eoscn-
tlrl functions as bauldng InstitutiOns.
The genernl rule is stated in 9 C.J.S.. Title --
B-6 A!iD DAM.WG, p. 31, MC. 3, as fGllW6:
"As has been indioat'ti in Section 1,
the principal attributesto the bau!z are
the right to iseue xqotlable notes, to
discount notes, aud t0 recoi7e deposits;
amI a&i10 as a xatter of mdern practice
banks usually exercise any'tuo or even
all tlareo of these~functi.ons, it is not
iwce~~ary thut t@y exer~isc them all,
but an dmitltution exercising:any one or
mom of these functions is a bank in the
Stl-iCtCSt COllEIWCi;il 6elX5e.s
I,atm in Lhc same motion that text declarcsc
*Originully, the business of banhing
consisted only of reoelving depoeits for
safe keoplng, and web at the prOstmt tirna
a bankls'primarily a plaoe for the dqmsit
OS money, and the receiving of the s~oney of
others Gn deposit IS a distinctive fOattWe
of the business of bauklng.s
ZGll~Wll cn kkanks and Banklnp;, Vol. 1, sec. 67%
dcclarasc
*The rery business of the honk is to
&a00 a place where dcpo6its are received
ani pai.& Gut and Khcro touoy is loanod on
security * Not all these functions, hOrrever,
seed be oxercisod In ardor to constitute an
institution a bank. The orerolso of a single
Honorable John CL. LcAdows - png0 4
function 4' baUlug, such as loting m~oy,
sclllng bonds, Or issuing OWre.3cy nuy be
sufficient tu ‘urin,:the iastitutlon'withln
the ragulal;iJne passe.3 by the State re:aiLve
to hmiks.’
lk la niisill Cc, commrclal sense, are of
three Lirni~6, tc-wit* 1, or daposit j 2, o f
dlscourt; 8, 6f drculatiou. Strictly sIu?ak-
inF;, t:ie term ‘bank’ hpliC6 a plnce rGr thC
dCpOC&t of XlGllej, aS that i6 the ,3,06t ObVi6U6
purpose of such au lnstltutlon~. Griglnally
the buoi~~csc of bauldmg canuistcd Only In rc-
CclVi~ dcpodtu, au& as bullion, pIatc axxi
the likC, sor Safe keeping Until the CiCllO6it-
cr s3czld ECC fit to dr.aw It cut for uua, but
tho bueincss, in the pcj+ss of events, x66
eXteIdCX%, 3ti bankt?rS aS6UXWd to t%p.?OUnt
bills .2x& note6 6.d tq loau money upon nort-
.gagc, ?a= or other security, and at a btlll
later period to lssuc notes or their own in-
tertled as a clroulatlng currcnoy and a medium
of exchange lnst0ad of gold 3x1~2silver. Ukiern
bankers frequently aerd6e w ix0 or even aI
three of those fimcti.ons,,but It is still tme
that ZII institution ;n‘ohlbited from cxerclslxig
any more than one CP those functiona in a bank
in the strictest coaxerclel sense, and unless
such a bank is brought wlthln the proviso under
consideration, is equally eubject to taxation
as if euthorizcd to nuake ascounts am1 isope
circulatiion a6
well as to receive dep0slts.a --
George Oulton, Collector, t. The San Y'raucleao
tiarings Unlori, 21 Law mt. (U.S.) 618.
In KaUokl T. Goaeett, Banking Comdafiloner,
100 8. s. (2) MO, it iG FM%id:
"hi the case of JIu rc ?rudencc Coupany,
(C.C.A.) 79 F.(2) 17,79, WC find tbe follow-
ing definition of a bank: 'Strictly speaklog,
tho tern bauk itaplies a place for the deposit
of money, as that Is the amst obrioua purpose
or such an instltutlon.* Tha opinion contln-
U6al *ktld all of tbo cases so far aa we aro
advisoti, uiiich Lava constmti the words.~bank-
Honorable John Q. kThdaui% - page 6
ing corpor8tion6,~ nu use3 In Lhc Unnls-
ruptcy Act, hav0 regardel tl~e lccal power
to rcxxive deposits az tU2 efi6cntlal tking.*"
(i.aILny AuthoritiC hare CitCd) .
19.e ~.ullsLA Oasc held ‘that n stookimldcr in a
kmrrle Plan tiauk wae not subject tc the supm-ad&O;; llabil-
ity 4 the UXlstitutlOl? anti 6tatUtC!j, ‘JCC~USC oucfi so-ca)l-
ed ;lorris'Plnn Unnkswcre not then antiioriz&3 to accept dc-
posite . The very t!lln&s vhicb your suj.;,7estloncontemplates
-- the depoeltin*; of 00llQy nni! cns?liny; oi' chcck3 -- me not
present in &tic ..aliskl CasIl, Tot :&icil rexon it appears'
the court held as It bil with respect to the stockholders*
1iaWlity. Tb0 Snprcmo Court r?fuscC a writ cf error in
that cesc.
Your quote1 suz:;cstion rroz :.njor Schooley and lxis~
iqlio;i recuest that we adopt it, to the effect that tha
bmqnors of sane ,of tllc stctcv wart cvmri6iny. tlxz mandates
of the Constituticrr. ir: re;;zrd 'cc br;.ixhc6 Car State banks,
is not In !~Ocpin~,xIth ccnstituti.onal Wndates.
'TaS i6 n fret? :iti indepa&cnt. State,
subject,onQ to the Constitution of rhe United
States, and the mintcnasxc or our free i.nsti-
tutions um? the perpetuity of' t:ic Union depend
upon-tl:c prosorvaticn cf the right'of local
self $ovcrnment, unimpaired to all the stateti.g
--Bill 0r ItIghts, Ccnstftution, Article 1, Sco-
tlon I.
*The military shall at times ba subonlinate
to the civil ;ruthoritics.* --secti 24, Article
1, COn6titutiOn.
mNo il&t?r of suspCrJciilJglatfs iJ'!this Statt3
&I‘&11 bc CxcrOisCd S%CC]Jt by tl&C LO&SlutlWC.*
--Section w, Article I, Coustitution.
W course, the power of tm Legislature it6Clf to
s&pend lau pertain6 Only to legislative acts ami not to con-
etitutlonal provisions. The 6nthU6i68fiC nUgp?stiOn that
any officer, or oven department of the Government, may BUS-
penil the Constitution i'inds no,support in law.
Honorable Jolm (?. Ldbkuis - page 6
In IZX purtc ldilligan (U.S.) IS Law Ed. p. 29S,
it 1s said:
a!krtiill rule can never cxi.sL where tilt
courts arc apcn, 6.d in the .+x-oper ancl unob-
structed cxcrciac of their jurisdictlon.g
The court upheld the ri&t of ~;illlgnn tc th'c
constituti6nnl writ of ?b,abeas corps upc.: tho principle
aImounc~ed by it .
Sour c,ucstion, therefore, is unewered as nbovc
indicated .
Very truly yours