             TEE      ATTORNEY    GENERAL
                         OF TEXAS




                         April   6, 1988



Mr. Kenneth W. Littlefield                Opinion   No. JM-886
Commissioner
Texas Department   of Banking             Re:    Constitutionality     of
2601 N. Lamar Blvd.                       article 342-803a,    V.T.C.S.,
Austin, Texas    78705                    which permits     the sale   of
                                          the assets of a bank with-
                                          out shareholder    approval  in
                                          certain circumstances
                                          (RQ-1252)

Dear   Mr.   Littlefield:

      You ask our    opinion about     the constitutionality       of
article 342-803a, V.T.C.S.,       a recent addition    to the Texas
Banking Code.     You note that the provision       is designed    to
facilitate   so-called   "open bank assistance"      schemes under-
taken by the Federal Deposit Insurance         Corporation     (FDIC)
to prevent the closure and liquidation         of failing banks in
Texas.    An "open bank assistance"      transaction   permits    the
FDIC to undertake      a variety    of measures     to prevent    the
outright   closure of a bank insured by it, including         making
contributions    to a prospective     purchaser   who may buy     the
assets    of   a  failing    bank.    See   aenerally     12 U.S.C.
51823(c).

       Article     342-803a   provides:

            Sec. 1. The     board    of   directors      of   a
         state   bank,  with     the    approval     of     the
         Commissioner,  may cause the bank to sell all
         or   a substantial     portion    of    the    bank's
         assets without shareholder      approval    if:

             (1) the Commissioner,      through   examina-
         tion, finds that the interests      of depositors
         and creditors     of  the  bank    are  seriously
         jeopardized   because of the bank's insolvency
         or imminent insolvency      and that    it is    in
         the best    interests   of the   depositors    and
         creditors   that certain assets of the bank be
         sold: and




                                  p. 4331
Mr.   Kenneth     W. Littlefield         - Page    2    (JM-886)




               (2) the Federal      Deposit Insurance      Cor-
           poration    or   its  successor    has   expressly
           consented   to   and approved    the   transaction
           and has agreed to provide assistance        to   the
           prospective    buyer  under 12 U.S.C.       Section
           1823(c) or a comparable     provision   of law.

               Sec. 2. A sale under    this article    must
           include an  assumption    and promise    by  the
           buyer to pay or otherwise   discharge:

               (1) all     of      the   bank's        liabilities   to
           depositors;

               (2)  all of  the bank's    liabilities    for
           salaries of   the bank's   employees    incurred
           before the date of the sale; and

               (3) the obligations  incurred by the Com-
           missioner  and  fees and  assessments  due   to
           the Department  arising  out of the   supervi-
           sion of the bank or the sale.
                                                                          7.
              Sec. 3.   This article does not affect the
           right of the Commissioner   to take any   other
           appropriate  action  permitted   by  [articles
           342-801a or 342-8031 or any other    provision
           of this code.

V.T.C.S.        art.   342-803a.

      You relate that the FDIC is reluctant     to   participate
in assistance   schemes undertaken     pursuant  to   this   pro-
vision because of unspecified   concerns about the constitu-
tionality  of article 342-803a.    Accordingly,    you seek   our
advice on the following  questions:

               (1)   Does article 342-803a violate any of
           the   applicable    substantive    or  procedural
           requirements   of the    due process clauses    of
           the   United   States     Constitution   or    any
           similar provisions     of the    Texas  Constitu-
           tion?

               (2)  Does article   342-803a  violate    the
           impairment  of  contracts  clause  of   Article
           One of the United States Constitution     or any
           similar provision   of the Texas Constitution?




                                         p. 4332
    Mr.   Kenneth   W. Littlefield    - Page     3   (JM-886)




                 (3) What are       the nature      and extent     of
P            the    banking       commissioner's        powers     to
             regulate     state    banks,    particularly      those
             banks    that    are   insolvent      or    imminently
             insolvent?     Can the banking commissioner          use
             his regulatory     powers to effectuate        the sale
             of   a bank's      assets     without    judicial     or
             shareholder    approval      if he    finds that     the
             interests     of depositors       or   creditors     are
             seriously    jeopardized    because of the       bank's
             insolvency    or imminent insolvency,        and   that
             it is in the best interest of depositors             and
             creditors   that certain assets be sold?

          We assume that your last        question   is limited to     the
    scope of the commissioner's       power over "failing"      banks    in
    the limited circumstances       specified    by the legislature      in
    article 342-803a.      Article     342-803a furnishes     a concise,
    complete description     of the banking commissioner's         powers
    to effectuate   transactions      designed to prevent       "failing"
    banks from    becoming     "failed"     ones.    We   note   that    in
    addition to article 342-803a,        the Bankings Code provides       a
    "complete  system of laws governing         . . . banks" and     vests
    the banking commissioner        with the authority      to insure     a
    strong banking system for        Texas by expeditiously       winding
    up the affairs of a       failed bank.     V.T.C.S.   art.   342-101.
    See also   Skillern,    Closina     and Licuidation     of Banks     in
    Texas, 26 SW. L.J. 830 (1972).

          The powers of the banking commissioner   have been    set
    out by the legislature   in the Banking Code of 1943,    Title
    16, V.T.C.S.    Among the   more important   of these   powers
    is the power to    close insolvent   banks.  Article   342-803
    provides  that whenever the commissioner,

             through examination,     finds that the interests
             of depositors    and   creditors   of a state    bank
             are seriously    jeopardized   through its insolv;
             ency or imminent insolvency       and that it is to
             the best    interest    of   such   depositors    and
             creditors   that   the bank    be closed    and   its
             assets liquidated,     he may close and liquidate
             the bank, unless its board of directors         close
             the bank and place it in his hands for ligui-
             dation.   . . .

    V.T.C.S.   art. 342-803.    A bank       is insolvent    when it    is
    unable to pay    its obligations,       including    the demands    of
    depositors,   as they come   due.       &8  V.T.C.S.   art.   342-803




                                       p. 4333
Mr.   Kenneth   W. Littlefield   - Page     4   (JM-886)




                                                                           ?


and cases decided thereunder.     The Banking Code sets forth
in detail    the duties   which the   commissioner  of  banking
must discharge   with   regard to banks    closed for  liguida-
tion.   V.T.C.S.  arts. 342-803 to 342-808.

      You note that article 342-803a provides        an  important
mechanism   to facilitate    the   state's efforts to prevent      a
~~failing~~ institution    from becoming   a "failed" one.      YOU
define a "failing"     institution   as one which is l*imminently
insolvent   and   whose    failure is highly     probable."     YOU
relate that the

         financial   condition   of   these    institutions
         weakens gradually     until   an    insolvency     is
         produced   and the institution    is closed.      The
         transition   from a   failing institution      to   a
         failed one takes from      six to twelve     months
         and    the    institution's      value     steadily
         deteriorates   as it gets closer to failure.

You state    that   the new    powers     granted to    the    banking
commissioner   by article     342-803a permit the       commissioner
to prevent the outright       closure of banks by       facilitating
arrangements    which    include      the   sale     of   a     failing
bank's "healthy"     assets    to   a   new    entity   which      also
agrees to assume some of       the selling bank's       liabilities,
as specified     in the   statute.1        The statute      does   not,
however, permit the      Banking Commission        to act    unilater-
ally; a sale     of assets    under article      342-803a can      take
place a      if the Federal Deposit Insurance         Corporation

         has expressly   consented   to and approved    the
         transaction   [for the sale of assets] and has
         agreed to provide assistance     to the prospec-
         tive buyer under 12 U.S.C.      Section   1823(c)
         or a comparable   provision   of law.




    1.  Article 342-803a      does not      require the     purchasing
entity to    assume   claims    of    subordinated      creditors     or
claims   of   stockholders.      See    V.T.C.S.     art.    342-804a.
Because the article    requires    only   a   partial assumption      of
liabilities,    the   consummation        of   a   sale     of   assets
transaction   under   article     342-803a     may in    practice     be
insufficient   to save a failing bank from insolvency.




                                  p. 4334
Mr.   Kenneth   W. Littlefield    - Page     5   (JM-886)




V.T.C.S.   art. 342-803a,   51(2).   It is in this c,ontext that
you ask    us  to  address the     FDIC's   concerns    about the
constitutionality    of   the  sale of    assets   procedure  set
forth in article 342-803a.

                                   I.

A.
       Article XVI, section 16,         of the Texas        Constitution
provides,   in pertinent part:

               Sec. 16.    (a) The    Legislature  shall   by
           general laws, authorize     the incorporation   of
           state banks    and savings    and loan   associa-
           tions and    shall  provide for     a system    of
           State supervision,   regulation    and control of
           such bodies    which will    adequately   protect
           and   secure   the  depo~sitors    and  creditors
           thereof.

This provision   permits the legislature,   by general law, to
authorize   the creation   of corporations   with banking     and
discounting   privileges and to provide for the control       and
supervision   of such corporations    by the state.     Pursuant
to this constitutional   grant of legislative    authority,   the
Texas Banking Code of 1943

           provides  a complete system of laws governing
           the organization,   operation,   supervision    and
           liquidation    of  state   banks,    and   to   the
           extent indicated by     the context,     governing
           private banks and    national banks      domiciled
           in this State. . . .

V.T.C.S.     art.   342-101.

      The Banking Code specifically       commits the      management
of all    of the   affairs of    a banking      corporation    to   the
directors   of the banking corporation       elected by the share-
holders, unless      the  shareholders     have    adopted     by-laws
providing   otherwise.    V.T.C.S.     art. 342-409.      Unlike    the
Texas Business Corporations        Act, nothing      in the    Banking
Code requires that shareholders         approve the sale of        all,
or substantially     all, of the banking corporation's         assets.
Comnare    Bus. Corp. Act art. 5.10 (A)(3) (two-thirds            vote
of shareholders    required for sale of all, or substantially
all, of the assets of a non-banking         corporation    outside of
the   regular    course   of   business).      The    provisions     in
article 342-803a of the Banking Code for a sale of              assets




                                   p. 4335
Mr.   Kenneth   W. Littlefield     - Page     6   (JM-886)




based solely on the approval of the directors    are   consis-
tent with the Banking Code's overall commitment    of author-
ity to directors   elected   by the shareholders rather    than
to the shareholders   themselves.

       In the context of   the question under discussion,           it
is important   to note that    the provisions     of the    Business
Corporations   Act   do  not apply    to   banking     corporations
unless the    Banking Code    is silent    with regard      to   some
matter    of  corporate   governance     provided     for   in    the
Business Corporations     Act.    Bus. Corp.      Act   art.    9.14,
5 (A) - Where the Banking Code is silent, the provisions            of
the Business Corporations      Act will apply,      to the     extent
that they are not inconsistent     with the provisions       of    the
Banking Code.    u.

      The   provision      in the     Business     Corporations         Act
requiring   shareholder     approval    for the sale of all of          the
assets of a corporation        outside    of the regular course          of
business   is in conflict with the provisions           of the Banking
Code, which leave       such decisions      generally     in the     hands
of the directors.        Article    342-409     of the    Banking     Code
requires that      the directors,      and not     the    stockholders,
make decisions     about the management       of the bank, unless          a
banking corporation#s       by-laws provide otherwise.           Article
342-803a   is consistent     with the Banking Code generally             in
committing   a decision      about whether       to sell    all of      the
assets of the      bank corporation      to   the directors.         Since
the Banking Code       commits authority      over    bank affairs       to
directors   rather than shareholders,           the provision     in    the
Business Corporations       Act. requiring      shareholder     approval
for the sale of all of the assets of a corporation                outside
of the regular course of business does not apply to                  sales
of bank    assets    such    as those     contemplated       in   article
342-803a of the Banking Code.          See aenerallv      Robertson      v.
State ex rel. William H. Clement, 406 S.W.Zd 90 (Tex. Civ.
APP. -- Fort Worth 1966, writ ref'd n.r.e.)              (Banking     Code
of 1943 provides     a complete      system of laws governing           the
organization    of   banking     corporations:     when    the    Banking
Code is specific about some aspect of the management                 of    a
banking corporation,        it   operates     to   the    exclusion      of
provisions   in the Business Corporations          Act).

      Consequently,      in   the   ordinary     situation,   article
342-803a cannot      possibly    impair   any of    the "rightsl'   of
shareholders    guaranteed    under either federal or state law,
because    shareholders     in banking       corporations    have   no
**right** to approve the sale       of the assets of the      corpor-
ation in    the   situation    specified     in   article   342-803a,




                                    p. 4336
Mr.   Kenneth   W. Littlefield     - Page     7   (JM-886)




unless they   have    reserved    that   right   in   a corporate
by-law.  Only when the shareholders       have reserved    through
a by-law   the right ~to     approve the     sale of   the   assets
of the bank do    questions    about   the constitutionality      of
article 342-803a arise.

B.
      The by-laws of a corporation         are a contract    between
the   corporation     and    its  shareholders.      Ainsworth      v.
Southwestern   Drug Corooration,     95 F.2d 172 (5th Cir. 1938)
(citing Texas law).       Both the federal and state       constitu-
tions prohibit the impairment        of contracts    by the    state.
U.S. Const., art.      I, section 10,      clause 1. U.S.      Const.
amend. 14; Tex. Const. art. I,         516.    In this case, it     is
important     to    determine      whether      the   legislature's
determination    in article 342-803a that the directors         of   a
banking corporation       may sell   all of     the assets   of    the
corporation    without     shareholder     approval   impermissibly
impairs the contract rights of shareholders          who, by    means
of a corporate    by-law, have reserved the right to         approve
such transactions.

      Ordinarily,   rights    are    governed     by    the   law    that
existed at the     the time the      rights vested.       Lanuever
Miller, 76 S.W.2d 1025       (Tex. 1934).       Subsequent      legisl::
tion that impairs     vested contract        rights is unconstitu-
tional. Id.: Travellers'      Insurance     Comnanv v. Marshall,       76
S.W.2d 1007 (Tex. 1934).       S    ,    a., Trustees     of Dartmouth
Colleae    v.  Woodward,     17 eX'        (4 Wheat.)       518    (1819)
(charters     granted     to     corporations        by     state     are
constitutionally    protected    contracts).

      In the case of banking corporations      created under the
general authority     granted   by  the   constitution     to  the
legislature,   a somewhat different   analysis   of the issue of
an unconstitutional.    impairment   of   a contract     must    be
pursued.    Every charter granted    to a banking     corporation
by the state is subject to the following       reservation:

           The rights, privileges,  and powers conferred
           by this [Banking] Code   are held subject   to
           the right of the legislature  to amend, alter
           or reform the same.

V.T.C.S.     art.   342-302.   See also   Bus.    Corp.   Act.   art.   9.12.

      Without this   specific reservation,     we believe     that
article 342-803a would be considered,     under Texas law,      to
work an unconstitutional    impairment of a contract      between




                                    p. 4337
                                                                               ,
 Mr.   Kenneth   W. Littlefield     - Page   8   (JM-886)




 the shareholders    and the   corporation, where   the   share-
 holders have reserved the right, by means of a by-law,        to
 vote to approve the sale of all, or substantially      all,   of
 the assets of the    banking corporation.   Tex . Const . art.
 I, 516; Travellers'   Insurance   Co., m.2

       Both the charter of a corporation       and the legislative
 act creating    it become part of the contract between         share-
 holders,   Shanken   v. Lee    Wolfman.    Inc., 370    S.W.2d     197
  (Tex. Civ. App.    - Houston 1963,     writ ref'd n.r.e.),       and
 all relevant constitutional      and statutory    laws are     incor-
 porated as a part of the corporate       charter    (which controls
 the by-laws     bf  the   corporation).      Baw    ‘V.   Lone   Star
 Buildina   8 Loan Association        71 S.W.2d    863, 867,     (Tex.
 1934) see also wner        v. Sohthwestern    Sav. and Loan Ass'n
'of Houston,    320 S.W.Zd 164 (Tex. Civ. App. - Austin 1958),
 aff'd in Dart, rev'd in Dart, 331 S.W.Zd 917 ( Tex.1960).

       The   legislature's       reservation      of    authority,       in
 article 342-302, to alter the Banking Code, is               sufficient
 to permit the state to alter the relationship              between     the
 state and the     banking corporation,         and the     relationship
 between the     banking     corporation     and    its   shareholders,
 without violating     any constitutional       prohibitions      against
 the   impairment     of   contracts.       Trustees     of     Dartmouth
 co11 eae, sunra, s       concurring     opinion of Justice         Story.
 See also    The   Sinkins Fund       Cases,    99 U.S.     700    (1878);
 Brundaue V.     he New Jersev Zinc. Co,         226 A.2d 585       (1967)
 See a enerally   18 Am. Jur. 2d 5083-901 Official           Comments    to
 section    1.02   of    the   Model    Business     Corporations      Act
 (1987); 7A Fletcher Cyclopedia         Corporations,       553668-3690;
 Gibson, How Fixed are Class Shareholder            Riahts?,    23 Law    &



     2.   The Texas      Constitution     has    been    interpreted      to
 impose a     far    stricter     limit on    legislation       under    the
 police power which impedes the exercise              of a pre-existing
 contract    right    that    which    is   imposed    by    the    federal
 constitution.       Comoare the     decision    of the    Texas Supreme
 Court in Travellers'          Insurance     co.,    suora     (holding    a
 mortgage     moratorium      unconstitutional       under    article     I,
 section 16,      of   the    Texas Constitution       even     under    the
 circumstances     of    a general     economic    collapse)     with    the
 decision    of   the   United     States    Supreme     Court     in Home
 Buildins    & Loan Association         v. Blaisdell,      290 U.S.      398
 (1934)     (sustaining       a similar       moratorium      against      a
 challenge    under the contracts       clause).




                                     p. 4338
         Mr.   Kenneth   W. Littlefield    - Page     9     (JW-886)




         Contemp. Probs., 283 (1958); Note, "Corporations               --    Stock
P
         Alienation    Restrictions     -- Powers of Directors       to Restrict
         Issued    Stock,*'     14 SW.     L.    J.     106     (1960);       Note,
         Vorporations:       Alteration    of Shareholder's      Rights:      Scope
         of the    Reserved     Power,"    3 Okla.    L.    Rev.    222    (1950).
         Contracts,      however      express,      may     not     fetter      the
         constitutional     authority    of the legislature.        "Parties may
         not remove     their    transactions      from   the    reach     of   the
         dominant constitutional         power by    making contracts         about
         them."    Norman v. Baltimore       & Ohio R. Co., 294 U.S.           240,
         307-08 (1935).       Any    other    conclusion     would    alter     the
         long-standing    policy,     embodied     in both    the    state     con-
         stitution   and the banking code, of placing strict controls
         upon, the operations        of banking     corporations     to    protect
         the public interest.

                                               II.

               You also    inquire whether     article 342-803a     deprives
         shareholders    in banking corporations     of their property      in
         violation    of either the   United States or Texas       Constitu-
         tions.    See U.S.    Const., amends.     5 and   14; Tex.    Const.
    ,-   art. I, §17.     We conclude   that the statute works no        such
         deprivation.

               Article I,    section      17, of      the    Texas     Constitution
         provide,   in part:

                  No person's property   shall be taken, damaged
                  or destroyed   or  applied to   a public    use
                  without adequate   compensation   being   made,
                  unless by the consent of such person.    . . .

               We are unable to determine        how article 342-803a could
         be applied to violate either article I, section 17, of the
         Texas Constitution,       or the    United States      Constitution's
         Fifth   and    Fourteenth      Amendment     prohibitions       against
         deprivation    of   property    without    "just   compensation"      or
         "due process of law.       Article 342-803a of the Banking Code
         does not    permit the     banking    commissioner     to   order    the
         directors   of banking corporation       to sell the assets of the
         corporation    in lieu of closing       it: it merely permits        the
         commissioner    to approve, and      in some ways to       facilitate,
-
         such a sale after the directors         have approved     it in accord
         with their     powers    under the    Banking     Code.    Nor   do   we
         understand   that the     banking commissioner        is granted     the
         power   by   article      342-803a    to    1'coercee8    recalcitrant
         directors    to   vote    to   sell   the    banking    corporation's
         assets.    While the directors      of a failing bank may not         be




                                            p. 4339
                                                                               ,

Mr.   Kenneth   W. Littlefield     - Page     10   (374-886)




given to    acts   of   heroism in   resisting   the   unpleasant
suggestions   of bank regulators,    article 342-803a gives the
commissioner    no  power    to force   bank   directors    to    do
anything.    So long as a bank     is not in a condition      which
would permit the banking commissioner       to intervene   in    its
management,   or to close it, see V.T.C.S.     arts. 342-801 and
803,   then   the   directors    remain    in  control   of     the
institution's    fate.

      The foregoing        analysis     leads us    to    conclude     that
article 342-803a cannot be considered              to be a species       of
"eminent domain,"        "forced     sale,"    or   lltaking'* statute,
since it '*takes10 nothing,         and since it can       in no way     be
said    to   render     valueless     by    state   action      something
previously     valuable.      See, e.a       Attorney   General Opinion
JW-827    (1987).    If    anything,    aiticle    342-803a extends        a
modicum     of   hope    to    the   shareholders      of   a     failing,
imminently      insolvent      bank   that    they    may   be   able    to
preserve    something      of   their    equity    property     interests
through a government-assisted           sale of assets sufficient        to
raise the      cash necessary       to pay all     claims against       the
bank in accordance       with the table of priorities           specified
in article 342-804a,        V.T.C.S.     The statute thus       preserves
rather     than    defeats      the    "distinct      investment-backed
expectationst' of       stockholders,       a key   factor     mitigating
against a "taking" label for the provision.                Penn    Central
Transnortation      Co. v. New York Citv, 438 U.S. 104 (1978).

      Although   the banking commissioner     has wide powers      to
act to protect      the public welfare     by preserving   a   sound
banking system, those powers are circumscribed         by    consti-
tutional    safeguards.      The  prohibitions     in  article     I,
section 17, of the Texas Constitution        and the constitution
forbid the state      to appropriate   the   assets of a     banking
corporation    owned by the stockholders,     either directly,     as
a prize for the state treasury,       or indirectly,   by    forcing
the transfer    of those assets to some private party of          the
state's choosing,     all without payment.

      Even if article      342-803a raises threshold        questions
which trigger     the   application     of   constitutional      safe-
guards, analysis cannot end with a simple conclusion              that
any exercise of power by the state to the detriment             of the
owners of a failing bank is impermissible.           Under    certain
circumstances,    property     may in   fact be    constitutionally
expropriated,   without anv compensation         as an exercise     of
the kind of police      power --    power to protect the       public
welfare      against       the     depredations        of     banking
corporations   -- which     the   Texas    Constitution     expressly




                                    p. 4340
    Mr.   Kenneth   W. Littlefield      - Page    11   (JM-886)




    reserves to the state in Article XVI, section 16. Attorney
    General Opinion JM-600         (1986) (and the cases cited           there-
    in).    Of    course, we     acknowledge     that    the Texas      Supreme
    Court holds that in certain circumstances               property may not
    be taken without compensation,           even in the exercise        of the
    police power.         Citv of    C lleae     Station v.      Turtle     Rock
    Corooration,      680   S.W.2d 8:2       804    (Tex. 1984);      Citv     of
    Austin     v.   Teaoue,     570    S.W.2d    389,    391    (Tex.    1978);
    Attorney      General      Opinion    JM-294       (1984).     See      also
    Stoebuck,     Police Power. Takinas and Due Process,             37 Wash.
    8 Lee L. Rev. 1057 (1980).           Whether a particular         applica-
    tion of     the police      power is unconstitutional          is    always
    a matter of       fact, and     the    issue must      be decided      on   a
    case-by-case     basis.      Citv    of Austin      v.   Teaaue,     a;
    Attorney    Genera; CFinAo; y-827          (1987). See also       Connollv
    v. Pension      &an fi       u r ntv Corooration,         475    U.S.     211
    (1986).     We    are confident      that article       342-803a    is    far
    removed from being the          species of statute that          engenders
    such constitutional        concerns.      The provision,      enacted      to
    deal with general distress          in the banking      industry,    merely
    implements     '*a public program that adjusts the benefits               and
    burdens of economic life          and . . . does not constitute             a
    taking"     requiring      compensation.       Connollv             Pension
    Benefit Guarantv Coroora~~o~~           suora.    See oenerzily      Annot.
    "Supreme Court's views                   what constitutes        "takina."
    within meaning of Fifth          Amendment's     command that      private
    property    not be     taken for     public use      without just       com-
    pensation,"     57 L.Ed.2d 1254.

                                          III.

          You relate that      the Federal     Deposit Insurance         Cor-
    poration    (FDIC),    whose   promise     of   assistance       to   the
    purchasers   of   a   failing    bank's assets       (who    must    also
    assume certain      of its   liabilities)     legally     is   required
    before article      342-803a may     be  applied by       the    banking
    commissioner,    has expressed     certain unspecified         concerns
    about the constitutionality       of the statute.       Because those
    concerns    remain    unidentified,     we    cannot    address      them
    directly,   other    than to   assume that      they may      encompass
    some of the points discussed        in parts one and two of          this
    opinion.

          National    bank   regulators   may   rely   on    a  federal
    statute which     works    in a much   more severe     fashion    to
    accomplish   certain    bank "rescue"   operations    through    the
    sale of assets in a way similar to article 342-803a.             The
    provision,   12 U.S.C. section      181, provides     in   relevant
P   part:




                                        p. 4341
Mr.   Kenneth   W.,Littlefield    - Page     12   (JW-886)




         Any [national     banking]    association    may    go
         into liquidation     and be    closed by the     vote
         of its shareholders     owning two-thirds      of its
         stock.    If the liouidation      is to be effected
         in whole or in Dart throuah the sale of            its
         assets to and the assumDtion        of its deDosits
         and liabilities      bv another     bank. the    Dur-
         chase    and  sale    aoreement     must   also     be
          DDrOVed     bv     its    shareholders        owninq
         gwo-thirds   of its stock unless an        emeraencv
         exists. .and the   corDtroller     of the   Currencv
         sDecificallv     waives    such    reouirement     for
         shareholder   aDDrova1.      (Emphasis added.)

12 U.S.C. 5181 (Supp.      1988).     The power of the comptroller
of the currency     to suspend the        right of shareholders       to
approve the sale      of a bank's      assets has been      sustained.
See. e.q, Minichello     v. Saxon, 266 F.Supp. 279 (D.C.           M.D.
Pa. 1967), aff'd sub nom. Minichello           v. CamD    394 F.2d 715
(3rd Cir. 1968), cert. den. 393 U.S. 849, rehearino               den.,
393 U.S. 992 (1968).       We find no reported cases         upholding
a constitutional    challenge     to this statute. Certainly,       the
"emergency"    required     by    the    federal   statute    must    be
analogous   to the situation      in which article     342-803a would
be applied,    namely    a   situation       in which     a  financial
institution   finds    itself     in   a   *'failingl'  but   not   yet
**failed"    condition.        Minichello       v.    Saxon,     supra.
Additionally,    unlike banking       corporations    subject to    the
federal statute, shareholders         in banks operating     under the
Texas Banking     Code have     no    general statutory      right    to
approve the sale of all of the assets of the corporation.

                             SUMMARY

            Article 342-803a       of   the    Texas    Banking
         Code of     1943,   which    permits    the    banking
         commissioner     to  approve     the   sale    of   the
         assets    of    a banking     corporation      by   its
         directors    in certain situations      specified    in
         the statute,      is a constitutional        exercise
         the legislature's       power    to provide     for    a
         safe    banking     system.       Shareholders        '
         banking     corporations     organized     under    tk:
         Banking Code have       no right     to approve     the
         sale of all,      or substantially      all, of     the
         assets of     the banking     corporation,      unless
         they have reserved such a right by means             of
         a corporate    by-law.    The legislature     has, by
         means of     its reserved     power to     amend    the




                                   p. 4342
Mr.   Kenneth   W. Littlefield      - Page     13   (JM-886)




         Banking Code, overridden       such by-laws in the
         case   of     banking    corporations      operating
         within    the     circumstances      specified     in
         article 342-803a, V.T.C.S.




                                             JIM      MATTOX
                                             Attorney  General   of Texas

MARY KELLER
First Assistant     Attorney     General

LOU MCCREARY
Executive  Assistant     Attorney     General

JUDGE ZOLLIE STEAKLEY
Special Assistant  Attorney         General

RICK GILPIN
Chairman,  Opinion     Committee

Prepared by Don Bustion
Assistant Attorney General




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