,-.   -




             The Attorney General of Texas
                                 November 25, 1980




          Mr. L. AIvis Viindygriff                     Opinion No. WV-278
          Commissioner
          Texas Savings and Loan Department            He: Trust       powers   for    stete-
          P. 0. Box 1089                               chartered      savings    and     lcan
          Austin, Texas 78767                          associations


          Dear Mr. Vandygriff:

                 You have asked several questions relating to the ability of a stete-
          chartered savings and loan association to offer trust services. You indicate
          that these questions have arisen as the result of e recent federal statute, the
          Depository Institutions Deregulation and Monetary Control Act of 1980, Pub.
          L. No. 96-221. This act authorizes the Federal Home Loan Bank Board to
          permit federally chartered savings and &an associations to act as trustee,
          executor, administrator,  or guardian, or in any other fiduciary capacity in
          which state banks, trust companies, or other corporations which come into
          competition with the federal associations are permitted to act under the
          laws of the state in which the association is located.

                You first ask:

                         1. Does section I, article l513a, V.T.C.S., authorize
                      a state-chartered    savings end loan association to
                      emend its articles of incorporation      to offer trust
                      services?

                There is no express statutory authority similar to that contained in the
          recent federa     law which authorizes     state-chartered   savings and loan
          associations to offer trust services. The two Texas statutes dealing with the
          subject are articles 1513a, V.T.C.S., and 852a, V.T.C.S., the Texas Savings
          and Loan Act. Section 1, article 1513a, V.T.C.S., provides:

                      Except as provided by Section 6 of this Act, trust
                      companies may be created, and eny corporation,
                      however     created,    may emend its charter        in
                      compliance herewith for the following purpose: to
                      act as trustee. . . and as sgent for the performance
                      of any lawful act. . . .




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Mr. L. Alvis Vandygriff   - PageTwo     @6V-278)




The exception referred to in section 6 covers foreign corporations and registered bank
hold@     companies, banks, or trust companies whose operations        are principally
conducted outside of Texas. Other than those companies, section 1 does not prevent
any particular type of corporation from emend@ its charter to provide trust services.
To the contrary, the language specifically allows ann corporation, however created, to
emend its charter to offer trust services.

      A stete-chartered    savings and loan association is e corporation. See Brezosport
Seviws and Loan Association v. American Savings and Loan Association,342         SW. 2d
747 (Tex. 1961); Prudential Building and Loan Association v. Shaw, 26 S.W. 2d 168 (Tex.
1930); see also V.T.C.S. art. 852e, SS2.01-.12.

       We believe that the language of section 1, article 1513e, V.T.C.S., is sufficiently
booed 90 as to include a savings and loan association as a corporation which may emend
its charter to offer trust services.

        Although the Texas Savings and Loan Act, article 852e, V.T.C.S., does not
specifically   address whether e state-chartered      savings and loan association may
exercise general trust powers, section 4.01 thereof provides that an association shall
have the rights enumerated in the act and the rights and powers “incidental to or
reasonably necessary for the accomplishment         of the objects and purposes of the
association.”   Accordirg to section 1.03(21, the primary purpose of an association is to
promote thrift and home finencirg; the principal activity is the lend@ to its members
of money accumulated in savings eccounts of its members on the security of first loans
on homes and other improved reel estate.       Other sections of the savings and loan act
 indicate that the statute was intended to permit state-chartered        savings and loan
associations to be able to compete effectively with federal associations.     -Cf. V.T.C.S.
art. 852e, SS5.16, 6.20.

       In order to fulfill its primary purpose, e state-chartered     savings and loan
association must be able to exercise powers which allow it to compete effectively with
e federal association.       We believe that the offering of trust services should be
considered an incidental power which helps to minimize any competitive advantages
that e federal association might have over state associations and thus eneblee the state
associations to fulfill their primary purpose. Because the Texas Savings and Loan Act
lacks an express prohibition egeinst offering trust services and includes a grant of
rights and powers incidental to the accomplishment of the purposes of the association,
we believe that stete-chartered        savings and loan associations   may utilize the
pmvisions of article 1513e to emend their corporate charters to offer trust services.

       You next ask:

                 2. May such association earmark all or e portion of its
             capital stock fund to meet the condition that a trust company
             have a fully paid-in capital of et least $500,000, es required in
             section 4 of article l513e, V.T.C.S.?




                                         p.   889
Mr. L. Alvis Vandygriff    - Pege Three      (~lr-278)




        Section 4 of article l513a provides as follows:

              Any such company must have a fully paid-in capital of not less
              than $500,000.

        No provision of article   1513e explains or further    describes   the capital   require-
ment.     We believe, however,    that the term “paid-in capital” is the same as “paid-up
capital” which is &fined ss        “stated capital” in article 1302-1.02(2), V.T.C.S. The
definition of “stated capital”    is found in article L02A(ll), Texas Business Corporation
Act, which provides:

              (ll) “Stated capital” means, et any particular   time, the sum of:

                  (a) the par value of all shares of the corporation       having a
                      per value that have been issued,

                  fb) the oonsideretion    fried by the corporation      in the
                      manner provided by law for all shsres of the corporation
                      without par v&e that lmve been issued, except such
                      part of the consideration actually received therefor 8s
                      may hve been ellaeted      to capital surplus in e manner
                      permitted by law, and

                  (c) such amounts not included in paragraphs (a) and (b) of
                      this s&section   as tWve been transferred   to stated
                      capital of the corporation, whether rpcn the issue of
                      shares as e share dividend cr otherwise, minus all
                      reductions from such sum as hsve been effected in a
                      manner permitted by law.

We do not find any inconsistency between this provision and provisions of the savings
and lcen act, and therefore we believe that it swplements the savings and loen act.
See
-    Bus. Corp. Act art. 9.14A.

        Section 2.02 of article 852e, V.T.C.S., prescribes the only form or type of stock
 that e state-chartered   ssvirgs and loan association may issue, which is referred to as
 “permanent Feserve ftmd stock” and is also tiwn        as “capital stock.” See Attorney
 General Opinion H-215 (19’74). To the extent that e savings and loan asso~tion     has e
 “stated capital” represented     by its “permanent     reserve fund stock” of et least
 $500,000, we believe this meets the requirement of section 4 of article 1513e, V.T.C.S.
 As this pmvision &es not require slrh ftmds to be designated or earmarked for this
 purpose, we do not believe that a savings and loan association would be required to do
 so.

         You next ask:

                   3. Does a savings and loan association that has authority to
               accept demand and time deposits purslrant to the Texas Savings




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Mr. L. Alvis Vfmdygriff - Page Pour          (MY-278)




           and Lcen Act, article 852e, V.T.C.S, forfeit its authority to
           accept such deposits atce it begins to offer trust services as e
           result of section 5 of article 1513e, V.T.C.S.?

     Section 5 of article    1513e provides as follows:

           Any such company shall not accept demand cr time deposits,
           except as hereinabove provided.

The exception referred      to by this section is contained   in section 1, pertinent   parts of
which are a5 follows:

            . . .any corporation,however created, may emend its charter. . .
            to act as trustee. . , and as agent for the performance  of sny
            lawful act, including the ri@ to receive depcsits made by
            sgencies of the United States of America for the authorized
            account of any individtel. . . .

      We believe the purpose of section 5 is to prevent a corporation that &es not
Independently possess the powers to accept demand or time deposits from asserting
such power by virtue of the ecquisition of trust powers by complyhg with article l513e,
V.T.C.S. We believe that the acquisition of trust powers by e state-chartered       savings
and loan association would mereIy be incidental to its operations, and thereby fall
within the ambit of section 4.01 of article 852e, V.T.C.S. The savings and lcan act
authorizes state-chartered   associations to accept savings accounts. V.T.C.S. art. 852a,
SS6.01-.20. We do not believe that a statechartered      savings and loan association that
emends its charter to acquire trust powers would surrender its authority to accept such
accounts or deposits therein

      In your final question, you ask:

                4.   Does section 2(b) of article l513e, V.T.C.S., permit the
            banking commissioner   to authorize the savings and loan depart-
            ment to conduct examination of trust departments of stete-
            chartered savings and loan associetions?

      The pertinent   part of section 2(b), article l513e, provides as follows:

            The Benkirg Commissioner of Texas shall have authority to
            examine op cause to be examined each swh corporation
            annually or more often if he &ems it necessary.

The savings and loan act also requires periodic examination of savings and loan
associations,   and section 8.10 of article 852e provides that the savings and loan
commissioner shall examine or cause sn examination to be made into the affairs of
every association sdject to the act.




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    Mr. L. Alvls Vandygriff   - Pqe Five       @V-278)




            Therefore, if a state-chartered    savings and lcen association elects to offer trust
    services, then it is subject to examination by the bank@ commissioner as well as the
    savings and loen commissioner et least of its trust operations.          While each statute
    authorizes     the respective commissioner to ceuse Bn examination to be made, we
    believe the language of the statutes would authorize e delegation of authority from
    one commissioner to another.          Although we believe that the banki& commissioner
    could dalegete his authority to examine the trust departments et e savings and loan
    association,     there is no requirement that he do 9~. Section 2(e) of article 1513e
    stijects    trust companies to supervision by the banking commissioner; clearly, the
    ultimate      Fesponsibility for regulating      trust companies rests with the banking
    commissioner.

                                            SUMMARY

                    A state-chartered   savings and loan association may emend
                its charter to offer trust services, es provided in article 1513e,
                V.T.C.S. If the association’s permanent reserve stock fund is et
                least $500,000, it will meet the $500,000 paid-in capital
                requirement.     The offering of trust services would merely be
                incidental   to an associetion’s authority     to accept savings
                eccounts, and therefore, the association       would not lose its
                ebility to accept such deposits. The state banking commissioner
                would retain primary authority for examining trust departments
                et such associetions.




                                                       MARK        WHITE
                                                       Attorney   General of Texas

     JOHN W. FAINTER, JR.
     First Assistant Attorney General

     RICHARD E. GRAY III
     Executive Assistant Attorney General

     Prepared by Thomas M. Pollen
     Assistant Attorney General

     APPROVED:
     OPINION COMMITTEE

     Susan L. Garrison,   Acting Chairman
     Jon Bible
     Rick Gilpin
     Thomas M. Pollan




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