Attorney General Opinion WW-0519

Mr. J. M. Falkner Opinion No. WW-5l9 Commissioner Department of Ranking Re: Whether savings and loan asso- Austin, Texas ciation commenced business within six months from the date of the issuance of certificate of authority by the Ranking Commissioner of Texas, as re- quired by Article 881a-4, V.C.S., and whether said Article is con- Dear Mr. Falkner: stitutional. You have requested the opinion of this office based upon the following factual situation: In the latter part of 1957 an application for char- ter for a savings and loan association was filed with the Department of Banking. An investigation was made February 26 1958 the Articles of Association an d F$LSs were approved an d filei, and a Certificate of Authority to do busi- ness was issued to the association. On June 6, 1958, the association made application to the Federal Savings and Loan Insurance Corporation for insur- ance of its shares through the Federal Home Loan Hank of Little Rock through which applications for insurance are processed. Upon receipt of the application a Vice-president of the Federal Home Loan Rank of Little Rock instructed the association not to transact any business, or advertise the possibility that insur ante would be approved before actual approval of the insurance was received by the association. The application for insurance is still pending. On or about August 5, 1958, the association notified the Ranking Department that it would commence business on August 18th. The Ranking Department having been advised that the association had not actually commenced business but had merely opened an office, sent a departmental examiner to in- vestigate the situation. On September 11, 1958, the depart- mental examiner completed his examination of the association as of August 26, 1958, which examination revealed the follow- ing facts: Mr. J. M. Falkner, page 2 mw-519) (1) The association had not opened share savings accounts or sold share certificates, or issued temporary re- ceipts for money received other than for permanent capital stock. (2) No loans of any type had been made or any pro- visions for loans or commitments to lend monev had been made by the association, nor were any loans being held in escrow for the association. (3) No books of original entry such as the general ledger, general journal or subsidiary ledger had been ac- quired. The only reco& in the possession of the association consisted of a check book, together with receipts for payment of certain expenses incurred. (4) No office supplies, temporary receipt books or certificates other than a book of permanent stock certificates had been purchased or acquired by the assoclationp nor had the association purchased or acquired bookkeeping equipment or other such equipment with the exceptfon of a corporate seal or furniture and fix ures 1 other than a desk, four chairs, an d a filing cabinet located in the "office" which were the prop- erty of the organizers. (5) No personnel necessary to the operation of the association had been employed except a young lady whose duties were to keep the "office" open from 8~30 A,M. to 12:OO Noon, and from 1:00 to 5':OO P.M., daily. No managing officer had been employed. (6) The name of the association was not permanently placed on the premises of the office building; however, two placards were taped to the windows of the office stating that the premises was the temporary home of the association, and the association had not advertised in any way that it was open for business. (7) The funds paid into the association for perma- nent stock and paid in surplus in the total sum of $l25,OOO.OO were intact, with the exception of certain necessary expendi~- tures made by the association in connection with the acquisi- tion of its "office " , and the other necessary expenses of the organizers. (8) The examiner found as a fact that no actual sav- ings and loan business had been transacted, and that no depos- its had been accepted, no loan applications taken, and no loan commitments made. Mr. J. M. Falkner, page 3 (WW-519) (9) At a hearing held in the office of the Banking Department on October 3, 1958 the President and attorney for the association stated that i.?z was his understandi,n:: that if the association transacted any business of any nature before the insurance was approved it would be impossible thereafter to obtain such approval , as shown by a letter from the Federal Home Loan Bank in which the association was advised not to transact business or advertise the possibility of future in::ur- ante of accounts until the application for insurance had been approved. He further stated that he was trying to follow the instructions of the Federal Home Loan Bank offi.cial by not transacting business of any nature before receiving the appro- val of the application for insurance. Based upon the foregoing fac.tual situation you have requested our opinion as to (1) whether the association did "commence business'* within six months from the date of the is- suance of its certificate of authority to do busi~ness as re-. quired by the provisions of Article 88ls&, Vernon9s Civ:.!. Statutes E. and (2) is Article 8817,-%, constitu ional? Ve,rnon 1s Ci.vi.'l Statutes, Article 88la-4, V.C.S., reads as follows: When the Banking Commissioner of Texas shall have approved the organization certificate and the proposed by-laws and shall have issued the certifi- cate of such approval and filing, ft shrill. then issue a certificate of authori.ty to do business, providing that when any building and I.oan assoc:la- tion holding a charter under the 1,~~s of this State shall fail to commence business within six months from the date of the issuance of ~the certificate of authority, such association shall~ ipso facto be dissolved and its cer,ti.ficato of incorporation shall be null and void, without further executive or judi- cial action," This article clearly provides that if the associa,!ion does not tlcommence business" within six months from the da,te of the issuance of its certificate of authorit.y, the associati~on shall a facto be dissolved and its corporate existence be-. come-; null and void without any further executive or judicial action. The Fifth Amendment to the ConsiI,W;:i '.lr. oi the Un,i.ted States provides that no person shall be deprived of his proper,t,:y without due process of l,aw. Article I, Section 19, of the Con- stitution of Texas provides that "no citizen of this State shall? I@-. J. M. Falkner, page 4' (wW-~13) be c~eprived of e . . property D O O except b;? due conrse of tl:~e law of tile land." This constltuti0na.l provisio:;: corre.- s?ords to the Fifth Amendment to the CorAst,i~r-Jtion 0,' tz;e United States. It is not deemc?d nece?s-,ry rcr c i. te a::;~ ,a',.l thor - ity to the effect that a corporation, or in .thfs C::je a bu.L'ld- ing a>>; l.oan association, which has been duly :r;ln%ed a char.+er by .>roper authorities of the State of Tex&s, is a citizen o!' t2ii:j St::te within the meaning of the two ccnstj trtfonai pr:ovL- sions above referred to It will be noted t:::at it is specifi- czlly stated in -the article that i.f the :sssocfakion ::n:i.:ls ?c 'tco:raence business" l~jitliip, six months from the -i.z ';e of ,t~e i.sslznce of tke certific,zte of zilthority by the Da:-king C~;iz?k;- sioner of the State of Tcxzs, the a.ssoci.~.?;ic~r? &::i';:I L.ac.; f:Lci~ 11 e c,:. j. 5: .5 olT.Te CL brl rdi * "lout further execn*I.ce ur Jill! icj.2.l act~:l3:1. The question which arises is, sirlce tr~r_~ ~o~~pc.!r,~ ?:a! i.s $F~; facto ,?issolvecl l!itliout r:ny further executive 3~ ji:c:~cin:~ 2,5- termination, who adjucXcates o!: ffnds, under $ given star- "f fct:s, xhether the association has "commenced >::i~!nes~'~ ~:rZ.':!:,ir: the t&e prescribed? Clearly, by the very term+ of cb,e .j X,:J i;:.::E;~jp t:.~c B-,nking Commissioner of Texas is w:thout, 32+;,iio ;' j,, t ;r t :y ::i e c j ;-i e whether the association, under a given state -)f r,acts, :l:k?.:- failed to commence business, or whether It ks cc%?menc?: bu.sh ness so as to relieve it from the penalty of forfe%Xr,? of it:s charter and right to do business thereto'?orz i;raritec %!- 1,:~ t,ha State of Texas in manner and form prov?.ded by law, an? (1~‘ of.fi,- EE. court, or otber tribunal 5s empo\8erecl, to ceterni.r.e t':::i,;: Its ch,arter and its certificate of authority ~0;;s" J~?T.:!:E property, and the provisions of the 2rti.cY.e -a:: n.ot be eo.cstrueG Lo be "the due COUJ ~ ., - -w of the 1;~ of tl:e I,LT~,~' ; then manifesi;ly, this statute attempts to deprive the ss;ockt,lon o' its propert'y ? in violation of Section 19, Article I, of thri Corlst~.‘;~utior! of Texas, ~ which guaran.tees "due process" t.o eve:;':7 c:t:~zen. It is the opinior? o., +' this office t!!a? the r.l;a.tui.e Article ?&a-k, Vernon's C!l.vil. Statute2 lwh'ich prolrides f,~~'iWe m fad0 dissolution and fizfeitlzr Oh I'm _, ,,,. . ,? +, .~, I:' the CCI. .,lf.~ci.~e or u- corporation of the association for fajl:..,!1g to 'lcommer~ce 't'll,ci~n-:s:," within the period of six months ?rom thy date of ,the Issuance of the certificate of authority ir violative. of the provisions of Section 19, Article I of the Constitution of Texas, and the Fifth Amendment to the Constitu~tion of the Ur:ited States. Mr. J. M. Falkner, page 5 (WW-519 ) In view of the holding tha t the provi.sions of the statute are violative of s.;ch constitutional p,rovisions, it is unnecessary to answer your first question as to whether, under the factual situation stated above, the association ?md or had not "commenced business" within the time prescri~bed by the statute. STJMMmY Article 881a-4, Vernon's Civil Statutes, which provides that unless a building and loan association shall "commence business" within six months from the date of the issuance of its certificate of au- thority the association shall be iDso facto dis- solved and its certificate of incorporation declared null and void without further executive or judicial action, violates the provisions of ti-e Fifth Amend- ment to the Constitution of the United S.i;ates, and Section 1-9, Article I, of the Constitution of Texas, and is therefore unconstitutional and vo.id,. Yours very truly, WILL WILSON Attorney General of Texas CKR:wb APPROVED: OPINIOM COMMITTEE Geo. P. Blackburn, Chairman J. C. Davis, Jr. L. P. Lollar Riley Eugene Fletcher C. EC. Richards Assistant REVIEWED FOR THE ATTORNEY GENERAL BY: W. V. Geppert