                            ORNEY       GENEKAL

                           OFTEXAS




Honorable,JohnQ. McAdsms
Commissioner,
Departmentof Banking
Austin,Texas

Dear Mr. McAdams:               OpinionNo. O-4912
                                Re: Whethsr or not a corporation
                                    may be organizedunder Title
                                    16 of the RevisedCivil Statutes
                                    of Texas having trust and dis-
                                    count powers only,without the
                                    reauiremsntof full paymentof
                                    it6 capitalin cash.
We beg to acknowledgereceiptof your letterasking an opinionfrom this
departmentupon the above-capitioned
                                  subjectmatter,the letterbeing as
follows:
“*I*,
"In view of the above please advisethis(Dspartmant
                                                 aa to whether or not
a corporationto be organizedunder theilprovisionsof Title 16 of the
RevisedStatutesof Texas, 1925,havingbnly trust and discountpowers,
without the Dower to receivedeposits,can be incorporatedwithout the
full paymentof its capitalin cash."

Article 376 of the RevisedCivil Statutesprovides:
 "Five or more .persons,a majorityof whom shall be residentsof this
'State,who have associatedthemselvesby written articlesof agreement
 ss~*.prdVid&%y*iiSgeneralcorporationlaw, may be incorporatedfor the
 purposeof establishing: (a) a bank of depositor discount,or both
 of depositand discount;(b) a bankingand trust company;or (c) a
 savingsbank. + * *"

It will be seen that the statuteauthorizesa bank of depositor
discount,and likewisea bankingand trust company.

The power to accept depositsis not the sole exclusivebankingfunction;
the power to discountpaper is itselfa bankingfunction. See; Zollman
on Banks and Banking,2% 4061-2. This is not only true generally,-but
especiallyso in the lip&t of the (a) clause in the foregoingstatute.

Section 16 of ArticleXVI recentlyamended is as follows:
"The Legislatureshall by generallaws, authorizethe incorporation
                                                               of
HonorableJohn Q. McAdams - page 2 , O-4912

corporatebodieswith bankingand discountingprivileges,and shall
providefor a system of State supervision,regulationand control
of such bodieswhich will adequatelyprotectand secure the depositors
and creditorsthereof.

"No such corporatebody shall be chartereduntil all of the authorized
capitalstock has been subscribedand paid for in full in cash. Such
body corporateshall not be authorizedto engage in businessat more
than one place which shall be designatedin its charter.

"No foreigncorporation,other than the nationalbanks of the United States,
shall be permittedto exercisebanking or discountingprivilegesin this
State.'l

We shall now determinewhether or not the case of Kaliskiv. Cossett,
BankingCommissioner,109 S.W. (2) 340, writ of error refused,cited by
you, has any effect upon the questionpropounded. That case involved
the constitutionaldouble liability imposedupon shareholdersin cor-
poratebodies "withbankingand discountingprivileges",as appliedto the
Peoples,'FinanceCompanyof San Antonio, incorporatedunder and by virtue
of the provisionsofSubdivision29 of Article ll21Revised Civil Statutes,
1911, laterSubdivision48 of Article 1302 RevisedCivil Statutes,1925.
The court held that such corporationwas not the corporatebody whose
shareholderswere liableto the superaddedliabilityof the Constitution,
because the Peoples'Industrial~Bank was not authorizedto "exercise
bankingand discountingprivileges." In the course of the opinionthe court
did say:

"We are urged to change the word 'and' to 'or',and read this phrase
                                   ' but we see no justification
"bankingor dlscounting::.privileges,                           for such
a construction, for unquestionablythe word 'banking'includesdiscounting.
The words 'and discounting'might be treated as surplusege,and the
sectionread to mean that shareholdersin bankingcorporationshouldnot
be issueduntil all of its stock had been paid for'in cash."

This language,we think is a dictum,for it is not the basis to any degree
whatever,of the court'sdecision,that decisionbeing as ebove stated.

However that may be, it is quite significantthat the writers of the
Constitutionin the last paragraphof Section 16 expresslydeclared,"No
Foreign corporation,other than the nationalbanks of the UnitedStates
shall be permittedto exercisebankingor discountingprivilegesin this
State." (Emphasissupplied). Obviously,the conventiondid not consider
c'iscountingan indispensable elementof banking,or, in other words,
bankingas includingdiscounting.

But, entirelyaside from the Constitution,the conslusionhereinafter
expressedwould be compelledby Article 377 of the HevisedCivil Statutes.

Upon these considerations,
                         you are respectfullyadvisedthat a banking
corporationorganizedin the manner and for the purposessuggestedby you
HonorableJohn Q. McAdams - page 3, O-4912



would not be entitledto receivea charteruntil all of the authorized
capitalstock had been subscribedand paid for in full in cash.

                                 Very truly yours

                             A??IORIiEX
                                     GEX3RALOFTEXAS

                          BY     a/ Ocie Speer

                                            Ocie Speer
                                             Assistant

OS-MR-cg

APPROVEDOCTOBEB17, 1942
s/ GeraldC. Mann
ATTORNE?Z
        GXNERALOFTEXAS


AFFORVED:Opinion committee
         By BJB, Chairman
