         OFFICE    OF THE   ATTORNEY     GENERAL   OF   TEXAS

                                AUSTIN




Eonorablo John ?. IfCmtlme,     Commloaloner
Dapmtmnt oi Dfmklng
Austin, Tern8
Attentlonr   li,   A. Janison
i?ear S&c




     law v&ml hno
     olsl~n am? li
     partia:&ar at
     quotad p36Qug
p&I-u;, ehrlres of the me:~bare plus the total onnh
dop3slts of? tho mxbore with the credit   union leso
my and cl1 outnttnnding obliflatlons  and llebllitios
of tk audit    unILon.* (Aots 1939, L6th tag.,     p.
221, NO. 5)
        W'Tho-usation.hnn  erlsan rs?ckrUing the laclo-
lutlvo intent lncidest     to tho loan llnlt   of orodit
tilonc,    us tbt? len~u%~o uaod In Grtiola ?1,84a  uhcm
ca~oidcrud In t&e 13ght of the loan timit rofer-
onae undar Artiole 2477 ep?oara to bo auoh 44 oa-
plble of two or three oo~~ntruotlons.      %fJ are #et-
tlu~ out bslcm. the condensed balanaa uheat ot QIIQ
of the ntnte ohnrtored 'arodI.t unions, and nil1 ap
proolut~ spt~cifL0 ad?%44 from y:u al to the loaft
limit    of YAuuion whdm bulanaco &oat ia p1e eimvn.
"Loami to :?anbore                              W&W~.~~
Cash on hand ana                                  ‘,       l
  in banks
FurnZture and Pixturso                                 4 04 .50



Total   /teaate                                 9195.939.14
                            .,
                                 L?lLb,h66
                                   57,643.V
                                      685.4~    173;000.98
Aaaounte Peyeble                                  X.637.06
     Total. llebllity   ordluafvs    of net
       oq?Ltal a/o                              174,63%04
mt  UmTivideu, ?rofits              12,697.60
Cueranty and/or Reserve
  Puna                              e.403,50 -- 2lU
Total   Li*biLFtiaa
            lb)   nC~&tal anal riwnlua” 13. !wmil on .the sme
formla    110 In (n) but the ce8h 8o:Jns~bs nnd Chc nmunt cl'
th?p ;nld-up n&mm WQ nob tnalzlcd       cwong tho 1l:~billtleo
in tfio ~sub5mhond.
              (01 "Capital and surplus" ie th.o difforocoo       ob-
tslzml by doduota         a subtrsl:and c33;)oaEd of alI, outztwdirq
llabll.ltlos,    lnoltiding woh iiQpBitS and th8 a;nnWIt oi^ tha
paid-up ubtxms, I'roz a fAIu$nd bnaod on total escot8.
           (d)   "Capital and f3wptu3 ” is’ bnecct on thn onme
rordla  PIGin (of abut the omh dogonlts nnU the mount oi
the ~miu-up ahr,res me not inoludad nnotu tho liabllitiou.
in the oubtmtcnd.




                                                                       .
lionoral.     Jolii ~~2.ilO.!dnns,   Com&3nlonor,     Page 5



rldiouloU9 results nlnco It is 173thomLZ0ol,ly LPpomlblo      for
the dlfforenco thoraby obtainail to ix cmra than zero, cad,
in tho p..roatnojorlty 0: 0~309, such dlfforonoe sill bo loos
than 20ro. The nbeurdity   of sunh n Co"ornti,a 3.0 furthr ro-
vealad whun WQ oonalder that Artiole 2464, V. A. C. z., ea
acendod, Units  borrmlna  by a Credit ljnJ.onto 19; of *oapital
and surplus", total imootronta   to 25/, of thio mount, ona
lndividanl lnvc5t~~onto to 5; of this S~QU-0.   IT thl0 fom.Ula
wore to bo adopted, RO would bo forced to my that a Credit
Dnlon’e     po%?er to land,     to borrow,   mid to invest     are all   ma-
surod either bye e tractional         pert of zero     or by a fkaotionol
pnrt of a aogative anoUr&,

          ?kploy~Mt   of olthez formla    (0) or (a) would a%om
to be prooluded by the fnot that aooh of t&ode fomrrloe %.?1-
ploys ntctaleooota~~ 08 a ninucod vheraao Artiole 2@.2a,
V. A. c. S., as msndod,    apcoiflcol.ly r%quirao that tho &n-
uenu bo "the sp,~rog%t% of the paid-up sharoo ot ths mabors
plus the total aao!~ dopoaltcP.   Althnurh the term *oa~lt41
nn3 surplus" is aoF-atima usaQ a8 synonymus     with Vot*l  as-
sstfP suoh usnp la yrooluded In this             problen     by the opooirlo
Zanguege of the above-oitod atatuto.
              Forclula (b) eiz~loys a ulnuend ahioh ooufom               to
the  atetutory   requlrenent       but ueeo n oubtmhond whloh         8x1
OlUdCi8  the nnount   ot the      @~id+i&~ shares end the oaob,     doposit
from tho *outstanding obligations a~3 l.iabilitlos". In the
bnlnnoo ohaet whioh you h%oe subtitta5, the sffaat  of this
axoluslon    IP to m&e "aaaounte payable" the only iton in the
oubtmlroml.     Aa mill be shown below, ~'0 feel thnt %ccounta
p,ayuble" 6x13 not Oonstltutcj  tha  solo outottinafw   liability
of tJ113 Unlonj omaoquontly,,we     are likcralae Poroscl to reJeoO
this formlo.
                                              cllffloulty
             An CM be ts~eniron tha nhovc~,'tha                           in
thin probloz ocmtoro       around the Uctomlnntlon    of those items
which nsy be olnosod       ae  ~outatmdin~ obli@tions    am? llnbll-
itlesw or the Union.        Te shall oonsfdor the varloue pooslble
itens In thls bolcnoo oh%&           eoparatolyt~

           3n.m   :.acount (ma-q3        Shnroo)r   Xnoe credit Unions             .
of tho kind uudor uo&idoration         tire qorporntions  (Artloles
2463 cm,d 2464 V. .A.~ C. ii., as i2nol3aeu), their s.harfx-9 are ~,ov-
orned by the prlnoiples     .(Ienorally appl1cmbI.o to shcx6s ol! oar-
pornto 8tooL    It lo well rao5&z%d          that the holaor of siloh
0 ohare lo not in the aame .posltlon &I the holder Of LUIobli-
gatioo or llnb~lity of a oorporation.,              The shareholder      has 110
IIonorttble John f.   KaAdamo, Commissioner,     Page 6


diroot intorost     in or &lain to the assets of the oorporatlon.
Although the offioors      of the oorporation    OWJ oortain duties
of loyalty     and cure to tho rharoholdor,    the corporation     par .
se oc:oo him nothing.     Dos?lte the fact. that a shareholder
does poasoso substantial       riehtn to the surplus of a oorpora-
tion, once aiviqends are properly deolared,         and a08pit8 the
fact that ho is ontitled       to a pro rata shtme of the corporate
assets upon dissolution       (see Artlole  2l+@, V. A. C. S., as
smcndod), thwa ri&te        are of an inohoato nature so lone as
the organization     I5 a goin5 oonoorn and so long as no spoolfio
proporty has boon allocated        for ths paymontof   dividends.
~~oAlli.stor v. ~ollpoo Oil Company, 90 S.3. (2d) 171, 176
(sup. Ct.);     10 TQX. Jur. 780-7S1, SOD. 152-153.       Conaequontly
tho oharos of Crodlt Unions do not oonstituto         "obligations
or liabilitiosw     nnd the amount of ouoh shares is properly ox-
oluacd from the subtrahend in the rosolution         of this problem.
           Depodts    bv ?.ln,mharnt-m&fndividunl   l.eaR,er Bnlanoos:
Credit Unions are outhorizoci to rocoivo       the oash dcpooits of
their members (Artlclon     2462 and 2lt66, V. A. 0. S., a3 txtwmded),
and ouoh dopdoito apparontly are roooived not as cajital            in-
vostmonts by tha mmbbors but as mere c7eposita oomporable to
those reoeived by ordinary savings and oommercial banks.             Such
doponits are plainly direot obligations       and liabilities      of the
rooeiving  organization.     As auoh they should be included in
the subtrahend under Artiolo     2484a.   %8 have been infomod
by a representative     of your Oopartment that the "Individual
LOaS0r 3alanccs" aooount of this company roproscnts           oash
deposits  by mambers whioH have been segregated from the general
deposit oocount.     Connoquently this account and the oash do-
posit aooount will be treated the S~JW for pwposos of this
opinion.   30 wish to noto, honeoar, that ne are not here passing
on the status of the Individual      LeQor Balances aocount when
suoh sooount contains itoms other than segrogatad oosh doposits.
                                  The status of cuoh aooounts as
oblir,atlo                       and the ncoeasity  for their in-
elusion in the subtrahond      is too patent to require difioussion.
            Pot Unclividocl Profltsr      Until dividend8 are lawtul-
ly deolared and a portion 04 the not profits           Is nllocatsd    for
the satisfaotion      of suoh dooloration,     nat profits   oomtitute
mwoly an aoorotion         to the oapltal  investment of the nhare-
h&de;~oua;3are      to be traated ocoordin@.yr       We 10 Tex. Jur.
                  Consequently suoh profits       do not reprosent ob-
li&tions    or~llablllties      of the Union,. Ilotioe,    however, that
                                                                                   --
                                        -<.ti




Honorable   Cohn 6. Ko.U.oms, Coztixionor,                    l?age 7


divldendc   Bccl::rod but unpaid nro direct   obligations of the
doclaricg   orgudzation   imd should be ir,oiudea in the subtrahend.
            ClKliTlIlty   tlnd/oP   KosorVe        The guaranty fund of
                                                   7UnC:
a Credit Union is cstnblishod        rud t~iaiut4lnoG under Artfole
24(32 ”to moot oontingonoies      or losses in its business':.          Al-
tbautfi such funds erc reserves for possible          liabilities,      ob-
lL:utions   or losses,     thqi in no oense represent       "outstandingW
obiigaticns   or li.abillties;    rather they cxxtitute          a sagro-
t;Eet portion af surplus kept inviolate          from fiividana dcolsra-
    rL .
            Thus, followln~   the dofinltion    oontained In Artiole
246413,the i “ccipital  ad ourplus"   of the instant Credit TJnlon
is obtained b.q a&&in.~ the 05z3h c?ei!oslto (in0lubi.a~ lodger
bolar;ccs)  to t1\3 a:!ouut of the paiil.-up sharas anil ded~lotlng
tharofran ths SW of tiio'cash deposits       (iooluciing  ls3cer bal-
ancss)   &id &ho 4CO0UiItQ :~aFutlo.   Ten ocroont of the tiqure
thus sbtnl.xd   (10,: of :113,034.&    or C11,303&6) represents
the loan limit of the Credit ihion under oonsiderati%.
             The l&n limit thus obtrlinod may secun unduly high
in view of ttie faot thfit such iU19ons hvovrsdly were ore~ted to
proYido '!1;:05cratc Ibans* (Article        2451) and in view qf the
EGllOra;\l ocnSsrlatis&   Gf the Articles      ~OVeTiliI~~ the creation
and operation     of such 'Jnians.      ?~orevnxr, the faot th%t the
old~losn limit of $l,GOO vxls oh;U&qd in 1939 (see Artlcle
2477, suprs) td the present !'Tv;o I:ianr:roit Dollars r;r ton >,nr
cent of the on,;itsl     and. surnlus, nhiohovor siwll be the lrxp
eP    may ~011 in:iioxte    an inteilticn    thr~t tho new 1Mt     bo ovan
striotor    thsn thnt'formerly     ~nxvailin&.      However, if such an
intention    wore aresent at the the that tho present loan limit
was established,      the languuge need to express it uao singular-
ly inapt P3r that purpoee.
            Trmting       that   this      Pully    answers your inquiry,     we
are
                                                           Yours vary truly
