OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
Eonorablo John ?. IfCmtlme, Commloaloner
Dapmtmnt oi Dfmklng
Austin, Tern8
Attentlonr li, A. Janison
i?ear S&c
law v&ml hno
olsl~n am? li
partia:&ar at
quotad p36Qug
p&I-u;, ehrlres of the me:~bare plus the total onnh
dop3slts of? tho mxbore with the credit union leso
my and cl1 outnttnnding obliflatlons and llebllitios
of tk audit unILon.* (Aots 1939, L6th tag., p.
221, NO. 5)
W'Tho-usation.hnn erlsan rs?ckrUing the laclo-
lutlvo intent lncidest to tho loan llnlt of orodit
tilonc, us tbt? len~u%~o uaod In Grtiola ?1,84a uhcm
ca~oidcrud In t&e 13ght of the loan timit rofer-
onae undar Artiole 2477 ep?oara to bo auoh 44 oa-
plble of two or three oo~~ntruotlons. %fJ are #et-
tlu~ out bslcm. the condensed balanaa uheat ot QIIQ
of the ntnte ohnrtored 'arodI.t unions, and nil1 ap
proolut~ spt~cifL0 ad?%44 from y:u al to the loaft
limit of YAuuion whdm bulanaco &oat ia p1e eimvn.
"Loami to :?anbore W&W~.~~
Cash on hand ana ‘, l
in banks
FurnZture and Pixturso 4 04 .50
Total /teaate 9195.939.14
.,
L?lLb,h66
57,643.V
685.4~ 173;000.98
Aaaounte Peyeble X.637.06
Total. llebllity ordluafvs of net
oq?Ltal a/o 174,63%04
mt UmTivideu, ?rofits 12,697.60
Cueranty and/or Reserve
Puna e.403,50 -- 2lU
Total Li*biLFtiaa
lb) nC~&tal anal riwnlua” 13. !wmil on .the sme
formla 110 In (n) but the ce8h 8o:Jns~bs nnd Chc nmunt cl'
th?p ;nld-up n&mm WQ nob tnalzlcd cwong tho 1l:~billtleo
in tfio ~sub5mhond.
(01 "Capital and surplus" ie th.o difforocoo ob-
tslzml by doduota a subtrsl:and c33;)oaEd of alI, outztwdirq
llabll.ltlos, lnoltiding woh iiQpBitS and th8 a;nnWIt oi^ tha
paid-up ubtxms, I'roz a fAIu$nd bnaod on total escot8.
(d) "Capital and f3wptu3 ” is’ bnecct on thn onme
rordla PIGin (of abut the omh dogonlts nnU the mount oi
the ~miu-up ahr,res me not inoludad nnotu tho liabllitiou.
in the oubtmtcnd.
.
lionoral. Jolii ~~2.ilO.!dnns, Com&3nlonor, Page 5
rldiouloU9 results nlnco It is 173thomLZ0ol,ly LPpomlblo for
the dlfforenco thoraby obtainail to ix cmra than zero, cad,
in tho p..roatnojorlty 0: 0~309, such dlfforonoe sill bo loos
than 20ro. The nbeurdity of sunh n Co"ornti,a 3.0 furthr ro-
vealad whun WQ oonalder that Artiole 2464, V. A. C. z., ea
acendod, Units borrmlna by a Credit ljnJ.onto 19; of *oapital
and surplus", total imootronta to 25/, of thio mount, ona
lndividanl lnvc5t~~onto to 5; of this S~QU-0. IT thl0 fom.Ula
wore to bo adopted, RO would bo forced to my that a Credit
Dnlon’e po%?er to land, to borrow, mid to invest are all ma-
surod either bye e tractional pert of zero or by a fkaotionol
pnrt of a aogative anoUr&,
?kploy~Mt of olthez formla (0) or (a) would a%om
to be prooluded by the fnot that aooh of t&ode fomrrloe %.?1-
ploys ntctaleooota~~ 08 a ninucod vheraao Artiole 2@.2a,
V. A. c. S., as msndod, apcoiflcol.ly r%quirao that tho &n-
uenu bo "the sp,~rog%t% of the paid-up sharoo ot ths mabors
plus the total aao!~ dopoaltcP. Althnurh the term *oa~lt41
nn3 surplus" is aoF-atima usaQ a8 synonymus with Vot*l as-
sstfP suoh usnp la yrooluded In this problen by the opooirlo
Zanguege of the above-oitod atatuto.
Forclula (b) eiz~loys a ulnuend ahioh ooufom to
the atetutory requlrenent but ueeo n oubtmhond whloh 8x1
OlUdCi8 the nnount ot the @~id+i&~ shares end the oaob, doposit
from tho *outstanding obligations a~3 l.iabilitlos". In the
bnlnnoo ohaet whioh you h%oe subtitta5, the sffaat of this
axoluslon IP to m&e "aaaounte payable" the only iton in the
oubtmlroml. Aa mill be shown below, ~'0 feel thnt %ccounta
p,ayuble" 6x13 not Oonstltutcj tha solo outottinafw liability
of tJ113 Unlonj omaoquontly,,we are likcralae Poroscl to reJeoO
this formlo.
cllffloulty
An CM be ts~eniron tha nhovc~,'tha in
thin probloz ocmtoro around the Uctomlnntlon of those items
which nsy be olnosod ae ~outatmdin~ obli@tions am? llnbll-
itlesw or the Union. Te shall oonsfdor the varloue pooslble
itens In thls bolcnoo oh%& eoparatolyt~
3n.m :.acount (ma-q3 Shnroo)r Xnoe credit Unions .
of tho kind uudor uo&idoration tire qorporntions (Artloles
2463 cm,d 2464 V. .A.~ C. ii., as i2nol3aeu), their s.harfx-9 are ~,ov-
orned by the prlnoiples .(Ienorally appl1cmbI.o to shcx6s ol! oar-
pornto 8tooL It lo well rao5&z%d that the holaor of siloh
0 ohare lo not in the aame .posltlon &I the holder Of LUIobli-
gatioo or llnb~lity of a oorporation., The shareholder has 110
IIonorttble John f. KaAdamo, Commissioner, Page 6
diroot intorost in or &lain to the assets of the oorporatlon.
Although the offioors of the oorporation OWJ oortain duties
of loyalty and cure to tho rharoholdor, the corporation par .
se oc:oo him nothing. Dos?lte the fact. that a shareholder
does poasoso substantial riehtn to the surplus of a oorpora-
tion, once aiviqends are properly deolared, and a08pit8 the
fact that ho is ontitled to a pro rata shtme of the corporate
assets upon dissolution (see Artlole 2l+@, V. A. C. S., as
smcndod), thwa ri&te are of an inohoato nature so lone as
the organization I5 a goin5 oonoorn and so long as no spoolfio
proporty has boon allocated for ths paymontof dividends.
~~oAlli.stor v. ~ollpoo Oil Company, 90 S.3. (2d) 171, 176
(sup. Ct.); 10 TQX. Jur. 780-7S1, SOD. 152-153. Conaequontly
tho oharos of Crodlt Unions do not oonstituto "obligations
or liabilitiosw nnd the amount of ouoh shares is properly ox-
oluacd from the subtrahend in the rosolution of this problem.
Depodts bv ?.ln,mharnt-m&fndividunl l.eaR,er Bnlanoos:
Credit Unions are outhorizoci to rocoivo the oash dcpooits of
their members (Artlclon 2462 and 2lt66, V. A. 0. S., a3 txtwmded),
and ouoh dopdoito apparontly are roooived not as cajital in-
vostmonts by tha mmbbors but as mere c7eposita oomporable to
those reoeived by ordinary savings and oommercial banks. Such
doponits are plainly direot obligations and liabilities of the
rooeiving organization. As auoh they should be included in
the subtrahend under Artiolo 2484a. %8 have been infomod
by a representative of your Oopartment that the "Individual
LOaS0r 3alanccs" aooount of this company roproscnts oash
deposits by mambers whioH have been segregated from the general
deposit oocount. Connoquently this account and the oash do-
posit aooount will be treated the S~JW for pwposos of this
opinion. 30 wish to noto, honeoar, that ne are not here passing
on the status of the Individual LeQor Balances aocount when
suoh sooount contains itoms other than segrogatad oosh doposits.
The status of cuoh aooounts as
oblir,atlo and the ncoeasity for their in-
elusion in the subtrahond is too patent to require difioussion.
Pot Unclividocl Profltsr Until dividend8 are lawtul-
ly deolared and a portion 04 the not profits Is nllocatsd for
the satisfaotion of suoh dooloration, nat profits oomtitute
mwoly an aoorotion to the oapltal investment of the nhare-
h&de;~oua;3are to be traated ocoordin@.yr We 10 Tex. Jur.
Consequently suoh profits do not reprosent ob-
li&tions or~llablllties of the Union,. Ilotioe, however, that
--
-<.ti
Honorable Cohn 6. Ko.U.oms, Coztixionor, l?age 7
divldendc Bccl::rod but unpaid nro direct obligations of the
doclaricg orgudzation imd should be ir,oiudea in the subtrahend.
ClKliTlIlty tlnd/oP KosorVe The guaranty fund of
7UnC:
a Credit Union is cstnblishod rud t~iaiut4lnoG under Artfole
24(32 ”to moot oontingonoies or losses in its business':. Al-
tbautfi such funds erc reserves for possible liabilities, ob-
lL:utions or losses, thqi in no oense represent "outstandingW
obiigaticns or li.abillties; rather they cxxtitute a sagro-
t;Eet portion af surplus kept inviolate from fiividana dcolsra-
rL .
Thus, followln~ the dofinltion oontained In Artiole
246413,the i “ccipital ad ourplus" of the instant Credit TJnlon
is obtained b.q a&&in.~ the 05z3h c?ei!oslto (in0lubi.a~ lodger
bolar;ccs) to t1\3 a:!ouut of the paiil.-up sharas anil ded~lotlng
tharofran ths SW of tiio'cash deposits (iooluciing ls3cer bal-
ancss) &id &ho 4CO0UiItQ :~aFutlo. Ten ocroont of the tiqure
thus sbtnl.xd (10,: of :113,034.& or C11,303&6) represents
the loan limit of the Credit ihion under oonsiderati%.
The l&n limit thus obtrlinod may secun unduly high
in view of ttie faot thfit such iU19ons hvovrsdly were ore~ted to
proYido '!1;:05cratc Ibans* (Article 2451) and in view qf the
EGllOra;\l ocnSsrlatis& Gf the Articles ~OVeTiliI~~ the creation
and operation of such 'Jnians. ?~orevnxr, the faot th%t the
old~losn limit of $l,GOO vxls oh;U&qd in 1939 (see Artlcle
2477, suprs) td the present !'Tv;o I:ianr:roit Dollars r;r ton >,nr
cent of the on,;itsl and. surnlus, nhiohovor siwll be the lrxp
eP may ~011 in:iioxte an inteilticn thr~t tho new 1Mt bo ovan
striotor thsn thnt'formerly ~nxvailin&. However, if such an
intention wore aresent at the the that tho present loan limit
was established, the languuge need to express it uao singular-
ly inapt P3r that purpoee.
Trmting that this Pully answers your inquiry, we
are
Yours vary truly