Mr. J. M. Falkner        Opinion No. WW-5l9
Commissioner
Department of Ranking    Re:   Whether savings and loan asso-
Austin, Texas                  ciation commenced business
                               within six months from the date
                               of the issuance of certificate
                               of authority by the Ranking
                               Commissioner of Texas, as re-
                               quired by Article 881a-4, V.C.S.,
                               and whether said Article is con-
Dear Mr. Falkner:              stitutional.
          You have requested the opinion of this office based
upon the following factual situation:
          In the latter part of 1957 an application for char-
ter for a savings and loan association was filed with the
Department of Banking. An investigation was made
February 26 1958 the Articles of Association and F$LSs     were
approved and filei, and a Certificate of Authority to do busi-
ness was issued to the association.
          On June 6, 1958, the association made application to
the Federal Savings and Loan Insurance Corporation for insur-
ance of its shares through the Federal Home Loan Hank of Little
Rock through which applications for insurance are processed.
Upon receipt of the application a Vice-president of the Federal
Home Loan Rank of Little Rock instructed the association not to
transact any business, or advertise the possibility that insur
ante would be approved before actual approval of the insurance
was received by the association. The application for insurance
is still pending.
          On or about August 5, 1958, the association notified
the Ranking Department that it would commence business on
August 18th. The Ranking Department having been advised that
the association had not actually commenced business but had
merely opened an office, sent a departmental examiner to in-
vestigate the situation. On September 11, 1958, the depart-
mental examiner completed his examination of the association
as of August 26, 1958, which examination revealed the follow-
ing facts:
Mr. J. M. Falkner, page 2   mw-519)


          (1) The association had not opened share savings
accounts or sold share certificates, or issued temporary re-
ceipts for money received other than for permanent capital
stock.
          (2) No loans of any type had been made or any pro-
visions for loans or commitments to lend monev had been made
by the association, nor were any loans being held in escrow for
the association.
          (3) No books of original entry such as the general
ledger, general journal or subsidiary ledger had been ac-
quired. The only reco&    in the possession of the association
consisted of a check book, together with receipts for payment
of certain expenses incurred.
          (4) No office supplies, temporary receipt books or
certificates other than a book of permanent stock certificates
had been purchased or acquired by the assoclationp nor had the
association purchased or acquired bookkeeping equipment or
other such equipment with the exceptfon of a corporate seal
or furniture and fix1ures other than a desk, four chairs, and
a filing cabinet located in the "office" which were the prop-
erty of the organizers.
          (5) No personnel necessary to the operation of the
association had been employed except a young lady whose duties
were to keep the "office" open from 8~30 A,M. to 12:OO Noon,
and from 1:00 to 5':OOP.M., daily. No managing officer had
been employed.
          (6) The name of the association was not permanently
placed on the premises of the office building; however, two
placards were taped to the windows of the office stating that
the premises was the temporary home of the association, and
the association had not advertised in any way that it was open
for business.
          (7) The funds paid into the association for perma-
nent stock and paid in surplus in the total sum of $l25,OOO.OO
were intact, with the exception of certain necessary expendi~-
tures made by the association in connection with the acquisi-
tion of its "office," and the other necessary expenses of the
organizers.
          (8)  The examiner found as a fact that no actual sav-
ings and loan business had been transacted, and that no depos-
its had been accepted, no loan applications taken, and no loan
commitments made.
Mr. J. M. Falkner, page 3   (WW-519)


          (9) At a hearing held in the office of the Banking
Department on October 3, 1958 the President and attorney for
the association stated that i.?z
                               was his understandi,n::
                                                     that if
the association transacted any business of any nature before
the insurance was approved it would be impossible thereafter
to obtain such approval, as shown by a letter from the Federal
Home Loan Bank in which the association was advised not to
transact business or advertise the possibility of future in::ur-
ante of accounts until the application for insurance had been
approved. He further stated that he was trying to follow the
instructions of the Federal Home Loan Bank offi.cialby not
transacting business of any nature before receiving the appro-
val of the application for insurance.
          Based upon the foregoing fac.tualsituation you have
requested our opinion as to (1) whether the association did
"commence business'*within six months from the date of the is-
suance of its certificate of authority to do busi~nessas re-.
quired by the provisions of Article 88ls&, Vernon9s Civ:.!.
Statutes and (2) is Article 8817,-%,Ve,rnon1s Ci.vi.'l
                                                    Statutes,
constituE.
         ional?
          Article 88la-4, V.C.S., reads as follows:
          When the Banking Commissioner of Texas shall
     have approved the organization certificate and the
     proposed by-laws and shall have issued the certifi-
     cate of such approval and filing, ft shrill.
                                                then
     issue a certificate of authori.tyto do business,
     providing that when any building and I.oanassoc:la-
     tion holding a charter under the 1,~~sof this State
     shall fail to commence business within six months
     from the date of the issuance of ~thecertificate of
     authority, such association shall~ipso facto be
     dissolved and its cer,ti.ficato
                                   of incorporation shall
     be null and void, without further executive or judi-
     cial action,"
          This article clearly provides that if the associa,!ion
does not tlcommencebusiness" within six months from the da,teof
the issuance of its certificate of authorit.y,the associati~on
shall a    facto be dissolved and its corporate existence be-.
come-;null and void without any further executive or judicial
action.
          The Fifth Amendment to the   ConsiI,W;:i
                                                 '.lr.
                                                    oi the Un,i.ted
States provides that no person shall   be deprived of his proper,t,:y
without due process of l,aw. Article   I, Section 19, of the Con-
stitution of Texas provides that "no   citizen of this State shall?
I@-.J. M. Falkner, page 4' (wW-~13)


be c~eprivedof e . . property D O O except b;?due conrse of
tl:~e
    law of tileland." This constltuti0na.lprovisio:;: corre.-
s?ords to the Fifth Amendment to the CorAst,i~r-Jtion
                                                   0,'tz;e
United States. It is not deemc?dnece?s-,ryrcrci. te a::;~
                                                        ,a',.l
                                                          thor-
ity to the effect that a corporation, or in .thfsC::jea bu.L'ld-
ing a>>;l.oanassociation, which has been duly :r;ln%eda char.+er
by .>roperauthorities of the State of Tex&s, is a citizen o!'
t2ii:j
     St::tewithin the meaning of the two ccnstjtrtfonai pr:ovL-
sions above referred to    It will be noted t:::at
                                                 it is specifi-
                                                            ?c
czlly stated in -thearticle that i.fthe :sssocfakion::n:i.:ls
'tco:raencebusiness" l~jitliip,
                            six months from the -i.z
                                                  ';eof ,t~e
i.sslznceof tke certific,zteof zilthorityby the Da:-kingC~;iz?k;-
sioner of the State of Tcxzs, the a.ssoci.~.?;ic~r?
                                               &::i';:I
                                                     L.ac.;
                                                          f:Lci~
11
 e c,:.
    j.
     5:.5
        olT.Te
            CLbrl
                rdi
               *"lout further execn*I.ceur Jill!
                                              icj.2.l
                                                    act~:l3:1.
The question which arises is, sirlcetr~r_~
                                         ~o~~pc.!r,~
                                                ?:a! i.s$F~;
facto ,?issolvecll!itliout
                         r:nyfurther executive 3~ ji:c:~cin:~
                                                           2,5-
termination, who adjucXcates o!:ffnds, under $ given star- "f
fct:s, xhether the association has "commenced >::i~!nes~'~
                                                         ~:rZ.':!:,ir:
the t&e prescribed?
          Clearly, by the very term+ of cb,e.j  X,:Ji;:.::E;~jp    t:.~c
B-,nkingCommissioner of Texas is w:thout,32+;,iio;'
                                                  j,,
                                                    t;r   t :y ::i
                                                                 ec j;-i
                                                                      e
whether the association, under a given state -)fr,acts,:l:k?.:-
failed to commence business, or whether It ks cc%?menc?:bu.sh
ness so as to relieve it from the penalty of forfe%Xr,? of it:s
charter and right to do business thereto'?orzi;raritec       %!-1,:~  t,ha
State of Texas in manner and form prov?.dedby law, an? (1~‘          of.fi,-
     court, or otber tribunal 5s empo\8erecl, to ceterni.r.e       t':::i,;:
EE.    Its ch,arterand its certificate of authority ~0;;s"          J~?T.:!:E
property, and the provisions of the 2rti.cY.e  -a::n.otbe eo.cstrueG
                  -w
Lo be "the due COUJ    of
                    ~ .,                       ; then manifesi;ly,
                         - the 1;~ of tl:eI,LT~,~'
this statute attempts to deprive the ss;ockt,lon o'   ? its propert'y
in violation of Section 19, Article I, of thri Corlst~.‘~
                                                        ;~utior!      of
Texas, which guaran.tees"due process" t.oeve:;':7 c:t:~zen.
                             +'this office t!!a?the r.l;a.tui.e
          It is the opinior?o.,
Article ?&a-k, Vernon's C!l.vil.Statute2 lwh'ichprolrides
                                                   . ,? +,f,~~'iWe
     fad0 dissolution and fizfeitlzr Oh the
                                           I'mCCI.
                                               _,
                                                ,,,.       .~,
                                                  .,lf.~ci.~e  I:'
                                                           or u-
m
corporation of the association for fajl:..,!1g
                                           to 'lcommer~ce 't'll,ci~n-:s:,"
within the period of six months ?rom thy date of ,theIssuance
of the certificate of authority ir violative.of the provisions
of Section 19, Article I of the Constitution of Texas, and the
Fifth Amendment to the Constitu~tionof the Ur:itedStates.
Mr. J. M. Falkner, page 5     (WW-519 )


          In view of the holding that the provi.sionsof the
statute are violative of s.;chconstitutional p,rovisions,it
is unnecessary to answer your first question as to whether,
under the factual situation stated above, the association ?md
or had not "commenced business" within the time prescri~bedby
the statute.
                              STJMMmY
           Article 881a-4, Vernon's Civil Statutes, which
      provides that unless a building and loan association
      shall "commence business" within six months from
      the date of the issuance of its certificate of au-
      thority the association shall be iDso facto dis-
      solved and its certificate of incorporation declared
      null and void without further executive or judicial
      action, violates the provisions of ti-eFifth Amend-
      ment to the Constitution of the United S.i;ates,
                                                     and
      Section 1-9,Article I, of the Constitution of Texas,
      and is therefore unconstitutional and vo.id,.
                                Yours very truly,
                                WILL WILSON
                                Attorney General of Texas



                                   C. EC.Richards
CKR:wb                             Assistant
APPROVED:
OPINIOM COMMITTEE
Geo. P. Blackburn, Chairman
J. C. Davis, Jr.
L. P. Lollar
Riley Eugene Fletcher
REVIEWED FOR THE ATTORNEY GENERAL
BY:   W. V. Geppert
