. 1
TEEAITORNEY GENERAL
OF-TEXAS
Au~T~N~I.'~~xAR
GELRALDC. MANN
XIXXX
ATTORNKY G*:SERAI-
Honorable George H. Sheppard
Comptroller of Public Accounts
Austin, Texas
Dear Sir:
i;i.nionNo. O-3526
: meaning of the term "book
value" in Article 88la-53,
V. A. C. S.
This is in reply to your inquiry as to how the term %ook value"
in Article 881a-53, Vernon's Annotated Revised Civil Statutes of
Texas, should be construed in the rendering of property, and the
fixing of tax values thereon, of building and loan associations.
Said Article 88la-53 is a part of a comprehensive act dealing
with building and loan associations, and said article reads as
follows:
"Every building and loan association doing business in this
state shall, in the city or town in which it is located to
the tax assossor at the time fixed by law and in the fol-
lowing manner: (a) The value or its office furniture and
fixtures therein; (b) the value of all real estate in such
city to which such association holds title; (c) the value
of its assets therein in excess of an amount representing
the total of (1) accounts payable and notes payable owing
by such association; (2) the book value of the shares out-
standing and (3) the assessed value of the furniture and
fixtures and real estate held by such association and ren-
dered by it for taxation."
An examination of the dictionaries and the cases involving the
term "book value" shows that it has a well understood meaning.
Webster's New International Dictionary, 2nd Ed. Unabridged,
gives a definition of "book value" as follows:
"The value of anything as shown by the books of account of
the business owning it; spedif., ofstock, the value as
indicated by the excess of assets over liabilities."
Hon. Geo. H. Sheppard, Page 2 O-3526
In 11 Corpus Juris Secundum 521 it defines *book value" as
follows:
". ..the value ascertained by deducting from the assets,
carried on the books, the liabilities and other matters
required to be deducted; the value as it appears from the
books; the value as predicted on the market value of the
assets of the company after deducting its liabilities, the
value shown by the audit of the business of the company up
to a date specified; and specifically in determining the
value of a share of stock upon withdrawal from an associa-
tion, it has been defined as meaning the proportionate
amount of the net assets, including profits or losses, of
the corporation, applied to a share of its stock...."
In the case of Lane v. Barnard, (N. Y. Sup. CT.) 173 N. Y. S.
714, the court said:
" ...The book value of stock ordinarily means the value
thereof as shown by the assets and liabilities as carried
on the books of the company,...n
In the case of Gurley v. %oodbuty, 177 N, 0. 70, 97 S.E. 754,
the court said:
"The meaning of "book value of stock" is well understood
and its ascertained by deductingfrom the assets, carried
on the books the liabilities and other matters required to
be deducted fPeople v, Coleman, 107 N.Y. 541, 14 N.E. 431;
Cabble v. Gabble, 111 App. Div. 426, 97 N.Y. Supp. 773...",
In the case of Elhard v. Rott, 36 N.D. 221, 162 N.sf.302, the
court said:
" ...It means value as predicated on the face value of the
assets of the corporation after deducting its liabilities.
Steeg v. Leopold Bldg. & Imp. Co., 126 La. 101, 52 South,
232-235; CabSle V. Cabble, 111 App. Div. 426, 97 N. Y.
Supp. 773-775; 1 idordsand Pharses (Second Series) 479.
The assets, of course, must appear upon the books of the
company, and must be able to be estimated therefore, but
it does not follow that the computation must have been made
on such books and appear on the ledger. The book value of
stock is determined by the face value of the assets as
they appear upon the books..."
In the case of People v. Coleman, 107 N. Y. 541, 14 N. ii.431,
the court said:
"One mode of arriving at the actual value of the capital
stoc!cof a corporation is to take what is sometimes called
the "book valuen , which is reached by estimating all the
Hon. Geo. H. Sheppard, Page 3 O-3526
assets as they appear upon the corporate books, and deduct-
ing all the liabilities and other matters required to be
deducted by law, and taking the balance as ths measure of
value for assessment. This seems to be a proper method for
arriving at the value of the capitaL stock in the case of
a corporation which is about to discontinue business, wind
up its affairs, and distributo its assets among its share-
holders;...s
The cases cited and quoted from above involved ordinary corpora-
tions, and not building and loan associations, but we see no
reason why the same definitions of "book value" would not apply
to building and loan associations. Said organizations are de-
fined in Article 8dla-1, Vernon's Annotated Revised Civil Statutes
of Texas, as follows:
"A buildinS and loan association, as contemplated by this
$7" iArts. 88la-1 to 8&a-68; P. CT Arts. 1136a-1 to 1136a-
1s any dssociation or corporation heretofore or here-
after formed created or organized which is chartered under
any building'and loan lack,and/or is principally in the
business of assistins its members to buy, improve or build
homes, or to remove the inculmbrancestherefrom, and .which
accumulates the fund s thus loaned through t!leissuance or
sale of its ovensh,res.ff
tiehave found one case construin;;the term "book value" with re-
ference to building,and lo:n associationstock, and that ,isthe
case of Thirteenth ?fard%ilding & Loan Association v. Ljeissberg,
115 N. J. %qo 467, 170 Atl. 662, 98 A. L. R. 134, in which the
court said:
"The withdrasialvalue should not be confused irith the "book
value", The 'Wthdr~~~al value" is the :imountictu~~llypaid,
in addition to such proportion of the profits, or such rate
of interest, as may he Prescribed by statute or by the by-
lavfs. The f*bookvalue" is the ;~roportionateamount of the
net assets, including profits or losses, of the association,
applied to a share of its stock, t&king into consideration
the amount rictuallypaid in, and the length of time the
association has had the use of the ;aoney...*
There are no Texas a?pell:ltecourt cases, as far as :iecan find,
of the term "book value." The term is
approving a definition-1
mentioned in the cnse of iiineinzerv. Day, (Tex. Civ. App.)
(2d) S76, but no definition is adopted by the a;?pellate
58 S. >i;.
court. Ye see no reason why the Texas courts should not be
governed by the SLi;te
weli ~;nt,,
--stood meaning of the term "book
the courts of other states have alnost unanimously
value" th;:Lt
adopted.
.. -
Hon. Geo. II.Sheppard, Page 4 O-3526
Our ans;qerto your inquiry is that the term "book value* in
Article Ma-53, V. A. C. S., means the value of the shares
outstanding as shown by tho assets and liabilities as carried
on the books of the building and loan association.
Yours very truly
7, 1941
APPROVEU JIJNi3
ATTUWEY GENERAL OF TEXAS
FIHST ASSISTANT BY
ATTOWJiY GENERAL Cecil C. Xotsch
Assistant