                THE          .LTJXBRNEY                    GENERAL
                                     OP%-JKXAS'




The Honorable      Jerry  (Nub) Donaldson                            Opinion     No.   H-     723
Chairman,     Financial  Institutions Committee
House of Representatives                                             Re:       The effect of section 6.14
State Capitol   Building                                                       of the Texas Savings and
Austin,  Texas                                                                 Loan Act upon the author-
                                                                               ity of political subdivi-
                                                                               sions to invest   surplus
                                                                               funds in savings and loan,
Dear    Representative       Donaldson:                                        associations.

    On behalf      of the House     Standing       Committee     on Financial      Institutions        you have
asked:

               In view of Section 6.14 of the Texas Savings
          and Loan Act (Art.       852a R. C.S.),   are there any
          restrictions    upon the authority   of political sub-
          divisions    of this state to invest surplus funds in
          savings accounts fin savings and loan associations
          operating    in this state?

       The Texas Savings        and Loan’Act   provision         to which      you have     referred     contains
very    broad language,        It reads in part:

                Administrators,         executors,      guardians,     trus-
          tees and other fiduciaries            of every kind and
          nature: counties,        cities,    towns and all other
          political    subdivisions       or instrumentalities       of
          this State; insurance         companies       doing business
          in this State; business          and nonprofit     corpora-
          tions; charitable      or educational        corporations
          or associations;       banks,, credit unions and all
          other financial      institutions      are hereby     speci-
          fically   authorized     and empowered          to invest
          funds held by them in savings accounts                 of any
          association     operating      under this law or any
          Federal     association.       . . .



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The Honorable      Jerry    (Nub)   Donaldson,       page    2   (H-723)




If applied in its most comprehensive        sense.  the foregoing    language would
authorize  fiduciaries,   trustees,    and public officers   to invest the funds
entrusted  to them in savings and loan association         savings accounts without
regard to limitations   imposed      by the Texas Probate     Code, the Texas
Trust Act, or laws governing        the selection  of depositories    for public monies.
However,    we do not believe    that result was intended nor that the provision
can be given that effect.

     On January 1, 1964. the Texas Savings and Loan Act, article        852a.
V.T.C.S..     succeeded   and replaced   former  article  881a which governed
building and loan associations     (Acts 1963, 58th Leg.,   ch. 113, p. 269).       The
title of the bill enacting the new law provides:

        An Act arranging          the Statutes of this State
        affecting    savings and loan associations                and their
        operations      in appropriate         Chapters      and Sections
        into a consistent        whole and under a single Act;
        defining certain       terms; providing          a method of
        forming     associations;       stating the powers,           duties
        and qualifications         of directors,       officers    and
        members        of such associations;          fixing the cor-
        porate power thereof;           regulating       the loans,
        investments       and ownership          of real property         by
         such associations;         providing     for. savings accounts
        and fixing rights and obligations               in regard thereto;
        providing      for the computation          of earnings,        trans-
        fers to loss reserves.            dividends       and surplus of
         such associations;         providing     for the supervision
        and regulation       of such associations,           their books
        and records,        accounting       practices,       statements,
         reports.    audits and examinations:               providing      for
         discontinuance       of violations      and receivership;
         limiting   the rights of foreign          associations       to do
         business    as a savings and loan association                  in this
        State; providing        for conversion        into Federal
         associations;      providing      for conversion         into State
         associations      and reorganization.            merger,      con-
         solidation     and voluntary       liquidation      of such
         associations;      exempting       savings accounts          from




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The Honorable      Jerry    (Nub)    Donaldson,       page    3     (f-I-723)




        securities     laws: authorizing           acknowledgements
        to be taken before members                and employees          of
        associations       who are notaries          public; providing
        for closing      of places of business;           permitting
        associations       to act to avoid losses;           providing
        for fees to be collected           by savings and loan’
        commissioner:           requiring     all associations
        authorized      to conduct a savings and loan busi-
        ness to conform           to this Act; providing          that
        outstanding       shares.      stock,    share accounts         and
        investment       certificates      (except     Permanent
        Reserve     Fund Stock) shall be considered                  as
        savings    accounts;        prohibiting     the issuance       of
        stock or shares not authorized                by this Act:
        providing     for ad valorem          taxation     of the
        property     of such associations;            permitting
         rule-making       procedures        to be instituted      under
        certain    conditions:        providing     hearing     pro-
        cedures;     providing       for judicial      review:    pro-
        viding penalties         for slander      of an association,
        embezzlement,            declaring     greater     dividends
        than earned,        failing to comply with law. sup-
        pressing     evidence       and disclosures         by examiners:
         repealing    all laws in conflict          herewith;     providing
        for severability         of the different       Chapters      or
        parts of Chapters           so that the unconstitutionality
         of one or more shall not affect the remainder                      of
        the Act; providing          an effective      date: and
         declaring    an emergency.

There is no indication   contained    in the title of such a sweeping     change in the
law regarding  the investment     of entrusted    funds as the above-quoted    language
from section 6.14 of the Act would imply.          Furthermore,   that section of the
Act, contains this additional    language:

             If upon the effective date of this Act the
        shares and share accounts      of associations
        operating   under Article  881a of the Revised
        Civil Statutes of 1925, as amended,        are legal




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The Honorable     Jerry   (Nub)   Donaldson,    page   4 (H-723)




         investments     for any particular     business,
         organization.     corporation,    fiduciary   or
         political   subdivision,    the savings accounts
         of associations      subject to terms of this Act
         shall be deemed to be legal investments          to
         the same extent as such shares and share
         accounts.

     This last sentence     of section 6.14 could perhaps        be given an interpretation
consistent    with a broad construction      of the earlier    language,    but a statute
s h ou 1 d’ b e c o n s t rue d in a manner that will render it constitutional,            if
possible.     53 Tex. Jur. 2d Statutes    5 158. A broad interpretation         of the sec-
tion 6.14 language would cause the title of the enactment             tb be misleadingly
narrow and, in our ooinion.        unconstitutional.      Tex. Const.    art. 3.-_ 6 35:
C. Haymon Construction          Company    v. American      Indemnity    Co.,  471 S. W. 2d
564 (Tex.Sup.      1971; Harris   County Fresh Water Supply District           No. 55 v.
Carr,     372 S. W. 2d 523 (Tex. Sup. 1963); 53 Tex. Jur. 2d Statutes          5 59.

     In our opinion,     section 6.14 of article     852a. V. T. C. S., was meant -
and should be construed         - only to signify that after passage       of the Act
savings accounts      in savings and loan associations         would be legal investments
for those fiduciaries       and public bodies permitted       by other law to invest in
similar   securities.      See ed.     V. T. C. S. arts.    836 and 6243~5 23; Prob. Code
 $389; but see V. T. CT          arts.  2544 et.,         2559 et se%    We do not believe
the provision,     in itself,   gives any political    subdivision   a power to make
investments    unaffected      by legal restrictions     found elsewhere   in the law of
this State.

    Accordingly,     we answer   your question    in the affirmative.        Without
examining    the entire   body of law relative   to financial     transactions    by all
the various   types of political   subdivisions,    it is impossible      for us to
specify  all legal restrictions   which might apply to the investment            authority
of such entities,   but we call to your attention      article   3, section    52 of the
Texas Constitution,     and the statutes previously       noted.




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The     Honorable      Jerry   (Nub)   Donaldson,         page   5    (H-723)




                                SUMMARY

                Section 6.14 of article      852a, V. T. C.S.,   the
          Texas Savings       and Loan Act,     does not authorize
          political    subdivisions    to invest in savings  accounts
          of savings     and loan associations      without regard to
          leeal restrictions       found elsewhere    upon the disposi-
          tion of public monies.

                                                   Very     truly    yours,




                                                   Attorney      General      of Texas

APPROVED:




DAVID     M.   WNDALL,         Fir&    Assistant




Opinion    Committee




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