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                                        October 28,   1958




    Honorable J. M. Falkner
    Banking Commlssioner
    Capital National Dank Building
    Austin, Texas
                                 Re: Attorney General Opinion
                                            No. NW-412
    Dear Ccmmissioner Falkner:
               At the request of many interested banks we
    have extensively reviewed Opinion No. WW-412 and have
    concluded that it is a correct analysis of the law.
               Therefore, this is to advise you that we do
    not intend to aiter the conclusions reached in the opinion.




    WW:csb
                             Aun~rni    ~.TEXAR




                                April 9, 1958

Hon. J. M. Falkner                     Opinion No. NW-412
Commissioner
Department of Banking                  Re: Are banking facilities of
Austin 14, Texas                       various national banks mal~n-
                                       tained on federal military es-
                                       tablishments and at Veterans
Dear Mr. Falkner:                      Administration hospitals illegal?
          You have requested our opinion as to the legality
of the maintenance of banking facilities by various national
banks. The issue raised concerns chiefly Article 3, 24 ,_I
                                                        hapter
IX of the Texas Banking Code, as amended Act? 1957, 55th
Legislature, page 448, Chapter 220, Section 3. (Art!.:le342-
903 V.C.S.), which prohibits state and nal;hxm.l :omks  from
maintaining branch offices and from cash%ng cheGks or re-
ceiving deposits except in its own banking house.
          As we understand the facts, these facilities are
located in Texas on some eighteen different bases o.fthe
Army, Navy and Air Porte and at a Veterzi, Am
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hospital located in Temple, Texas. pi,3s* :'h,:;.j.,.i;~fe$g
                                                       p:",;,-
vide services in accordance with the re&;il!.ii;,f<,~i~
                                                   ,;."
                                                      ?::eAir
Force, A-rmyand Navy, as the case may be. 1‘xe';s-;<df";$-;;ie
Veterans   A&ni,nistration        operation       is   s~‘~3,t;~.ri-‘111~;L1S‘
                                                                            .:~“.?ikLcal)   .
The following is a listing of the services z.9;:-.t
                                                  r>.f;li;
                                                      ir the
applicable Air Force Regulation:
                 "(1) Provision for paying an5 :deceF~iE:;g
            facilities for officers, airmen ar8 'civf:.ian
            employees of the Department of the Air Force
            acting in their individual capacities.
                 "(2) Provision for paying and receiving
            facilities for custodians of non-appropriated
            funds of the Air Force, acting in such capa-
            city.
                 "(3) Furnishing cash to finance officers
            of the Air Force, including payroll requfre-
            ments when determined desirable.
Hon. J. M. Falkner, page 2 (NW-412)


               "(4) Accepting deposits for finance officers
          of the Air Force for credit to his official account
          with Treasurer of the United States.
               “(5) Selling savings bonds and stamps for
          cash.
               “(6) Selling banking paper, such as cash-
          ier's checks, bank money orders and travelers'
          checks.
                  "(7)   Redemption of savings bonds."
          Article 3, Chapter IX of the Banking Code provides:
               "'Art.3. Branch Banking Prohibited. No
          state, national orprivate bank,shall engagzin
          business in more than one place, maintain any
          branch office, or cash checks or receive deposits
          except in its own banking house. . ." (-Emphasis
          supplied).
In each case, these facilities are maintained separate and :...
apart from the banking house of the respective national banks
concerned. The prohibition of the statute is clear and un-
ambiguous as to the cashing of checks and receipt of deposits.
It is immaterial that the facilities are located on military
reservations on which the State of Texas may in some instances
have ceded jurisdiction, for the prohibition runs against the
parent banks which in each instance is clearly located with-
in the state's jurisdiction. It is unnecessary to decide
whether the prohibition of the statute against engaging in
business at more than one place or maintaining a branch of-
fice applies to the situation at hand, for the cashing of
checks'and receipt of deposits for and on behalf of military
personnel and civilian employees in their individual capa-
cities is clearly proscribed by Article 3, Chapter IX of the
Banking Code. Accordingly, the balance of this opinion will
be limited todiscussion of that activity.
          The question has been raised as to the scope of the
StatelS ~authority to regulate the activities of national banks.
Can a'state prohibit a national bank from engaging in branch
banking activities? We think this question was determined in
the case of First National.Hank in St. Louis v. State of Mis-
sou+i, 263 U.S b40 ( 23) 1       h hit          d th t
tlonal bank could not'%th'imEu%iG    viol%   t;i sta:e %.%te
which provides that "No bank shall maintain in this state a
Hon. J. M. Falkner, page 3 (WW-412)


branch bank or receive deposits or pay checks except in its
own banking house." Subsequent to the Court's decision in
this case; Congress chose to enact the language now,.found~.in
12 USC 36, which reads as follows:
               "The conditions upon which a national
          banking association may retain or establish
          and operate a branch or branches are the
          following:
               11   .(c) A national banking assocla-
          tlon may; with the approval of the Comptrol-
          ler of the 'Currency, establish and operate
          new branches: (1) Within the limits of the
          city, town or village in which said associa-
          tion is situated, if such establishments and
          operation are at the time expressly authorized
          to State'banks by the law of the State in
                         2) at any point within the
                         said association is situated,
          if such establishment and operation are at
          the time authorized to State banks by the
          statute law of the State in question by
          language specifically granting such authority
          affirmatively and not merely by implication
          or recognition, and subject to the restric-
          tlons as to location imposed by the law of
          the State on State banks. . .
               II   .(f) The term 'branch' as used in
          this section shall be held to include any
          branch bank, branch office, branch agency,
          additional office, or any branch place of
          business located in any State or Territory
          of the United States or in the District of
          Columbia at which deposits are received, or
          checks paid, or money lent." (Rnphasis sup-
          plied).
This language codifies the Court's decision in First National
Hank in St. Louis v. State of Missouri, supra. -examination
of the leeislative historv of 12 USC 3-1s       indicates that
the purpose of the statutk was to preserve to the states their
right to prohibit national banking within their boundaries from
engaging in any degree of branch banking. (See the remarks
of Congressman Lute in the Debates of Congress, 77 Congressional
Record, 5895). We are not unaware of the contrary language
in two Michigan cases, (Rushton v. Michigan National Hank
                                                         -      .




Hon. J. M, Falkner, page 4 (WW-412)


298 Mich. 417, 299 N.W. 129 Mich. Sup. 1941); Millard v. First
National Bank of Detroit, 33 Mich. 610, 61 N.W.2d 804 (Mich.
Sup. 1953)). In neither was review sought by the Supreme Court
of the United States. At the time of Rushton v. Michigan Na-
tional Bank, supra, the state statute authorized branch banks
in certain.instances. There was, therefore, the requisite
state statutory authorization set forth in 12 USC 36. At the
time of Millard v. First National Bank of Detroit, supra, the
state statute did not apply to national banks   Cases are
therefore distinguishable. There is nothing in the legal au-
thorities nor in the legislative history of the enactment of
12 USC 36 to indicate that Congress meant to limit In any way
the decision of First National-Hank in St. Louis v. State of-
Missouri, supra. Accordingly, it is our opinion that the state
does have authority to prohibit national banks from engaging
in branch banking.
          The proponents of these branch facilities have sub-
mltted lengthy briefs which we have carefully considered.
They contend that the state statute does not apply on the
grounds that the facilities in question are being maintained
as depositories of public money and as fiscal and financial
agents of the United States government pursuant to 12 USC 90,
and pursuant to an opinion of the Honorable Tom Clark when
he was Attorney General of the United States with which you
are familiar. (Opinion dated January 20, 1948, directed to
the Secretary of Treasury and Secretary of the Army). A
careful scrutiny of this opinion will show at the outset
that it does not authorize the cashing of checks or receipt
of deposits on behalf of military personnel and civilian -
employees in their own individual capacities, although it
does authorize the maintenance of some of the other types of
services set out above.
          We are aware of the language In the opinion of the
Federal District Court for the Northern District of Texas in
United States v. Papworth, 156 Fed. Sup. 842, (November 11,
m3.f) presently on appeal to the Court of Appeals for the
Fifth'Circuit to the effect that the branch facilities main-
tained on Carswell Air Force Base cannot be regulated by the
State because the facility is designated as a fiscal and fi-
nancial agent of the United States and a depository of pub-
lic money. A careful reading of the case will show that the
language alluded to was clearly unnecessary to the holding of
the case and is therefore dictum. Furthermore, the question
of whether or not the bank, in cashing checks and receiving
deposits for military and civilian personnel acting in thelr
own individual capacity, was acting within the scope of its
Hon. J. M. Falkner, page 5 (WW-412)


agency or authority as depository of the United States or as
a fiscal or financial agent of the United States, was not in
issue.
          There Is nothing in the language or legislative his-
tory'of 12 USC 90 or of any~other applicable federal statute,
or in the legal authorities, that indicates that the cashing
of checks and receipt of deposits for Individuals falls with-
in the scope of authority of a national bank acting as a fis-
cal or financial agent of the united States. Historically,
the activities of a fiscal and financial agent have been
limited to transactions which are for the monetary and fis-
cal benefit of the United States, such as the purchase of
gold or silver, the redemption of specie, and the funding of
loans for the United States. Clearly, the activities of na-
tional banks in cashing checks and receiving deposits for
individuals does not create such a monetary or fiscal bene-
fit for the United States government. Obviously, in conduct-
ing such activities, the banks are not acting as depositories
of public money, Furthermore, in conducting such transactions
the banks are not acting on behalf of the United States in the
sense that an agent acts on behalf of his principal for these
transactions are for the direct benefit of the individuals con-
cerned. Thus, the cashing of checks and receiving of deposits
by military and civilian per,sonnelin their individual capa-
cities cannot be said to fall within the scope of any agency
or function that national banks are bound to perform pursuant
to 12 USC 90 or any other statute using similar verbiage.
          Even if the transactions In question did fall with-
in the scope of such an agency, your attention is directed to
the fact that the present language of 12 USC 36 was enacted
in 1927, subsequent to enactment of 12 USC 90. It was there-
fore a limitation upon the methods and means national banks
could employ in performing the functions authorized or re-
quired by law. It prohibits these functions from being car-
ried out by the means of, "branches" as that term is defined
in 12 USC 36. Therefore, by no reasonable construction can
12 USC 90 be said to override the provisions of 12 USC 36
which preserves to the states their historic right to prohi-
bit the activities described in accordance with the holding
of First National Hank in St. Louis v. State of Missouri, supra.
                          SUMMARY
               The maintenance by national banks which
          have their main banking houses located in the
          State of Texas of additional and separate of-
Hon. J. M. Falkner, page 6 (WW-412)


            fices on military reservations and at Veterans
            Administration hospitals, at which checks are
            cashed and deposits received on behalf of mili-
            tary personnel or civilian employees in their
            individual capacities, is illegal by virtue of
            Article 3, Chapter IX of the Texas Banking Code,
            as amended.
                               Very truly yours,
                               WILL WILSON
                               Attorney General of Texas

                                + : CA,., &./‘f        )..,
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WPF:nh                         Wallace P. Finfrock
                               Assistant

APPROVED:
OPINION COMMITTEE:
Geo. P. BUickburn Chairman
C. K. Richards
Houghton Brownlee, Jr.
Lawrence Jones
REVIEWED FOR THE ATTORNEY GENERAL
BY: W. V. Geppert
