                    E   L~YYJXBRNEY     GENERAL
                           OFI'EXAS




Honorable J. M. Falkner          Opinion No.~~
                                             M-02
Commissioner, Department of
  Banking                        Re: Whether the Sharpstown State
Austin, Texas                      Bank of Houston has the authority
                                   to purchase property, identified
Dear Mr. Falkner:                  on submitted map as Building "F".
     In your letter to this office you have requested the opinion
of the Attorney General as to whether the Sharpstown State Bank
may, under the laws of Texas, purchase a building designated as
Building "F" in the Sharpstown Shopping Center, Houston, Harris
County, Texas.
     Building 'IF",as shown on the submitted map, consists of
one single integrated structure, a portion of which is ten (10)
stories high and a portion of which is two (2) stories high.
Under the facts submitted, the Sharpstown State Bank presently
leases a portion of the ten (10) story part of the said building
for space in which to conduct its banking operations, other
sections of the ten (10) story portion being rented to commercial
tenants. Furthermore, the two (2) story portion of the structure
is also currently rented to commercial tenants.
     Article 342-501, Vernon's Civil Statutes, provides, in
part, that:
            "NO state bank shall, without prior written
             consent of the Banking Commissioner, invest
             an amount in excess of fifty per cent (5C$)
             of its capital and certified surplus in a
             domicile (including land and building) nor
             an amount in excess of fifteen per cent (15%)
             of its capital and certified surplus in its
             furniture and fixtures. o 0"
     From the facts submitted, 'this statute is not relevant, in
that the Sharpstown State Bank would increase its capital and
certified surplus in an amount equal to the cost of the new building,
should such purchase be.deemed lawful. We next turn to Article
342-502, Vernon's Civil Statutes, which provides, in part, that:

                           - 365 -
Honorable 3. M. Falkner, page 2       (M-82)



            "No state bank shall acauire real estate.
             other than its domicile, except in satis-
             factionor partial sat,isfactionof in-
            ,debtedness,-OF in the ordinary course of
             the collection of loans and other obli-
             gations owing the bank, or for the use of
             the bank and future expansion of its banking
             house i o 0" (Emphasis Suppiled)
     In this regard, Judge Speer, i,nLaw of Banks and Banking
in Texas (1952), Section 102, characterizes the use of the bank
building as follows:
            "Under the provisions of Article 3 of Chapter
             IX of the Banking Code it is the author's
             thought that some consideration should be
             given to the phrase in its own banking hou.se.
            "While the Constitution and Code have taken
             meticulous care in osder to prevent branch
             banking, and to confine the activities of
             banks t,oiheir own place of business and
             bank building, no a,ttempthas been made to
             define the character of the building.
            "Obviously the bank may acquire and,own a
             building of such architec%ural arrangement,
             and structural features,,and of such proportions
             and spaces as %he board in its sound business
             discretion thinks advantageous, and appropriate-
             within the limitations of the investment PPO-
             visions. It is not required that the building
             be not beyond the bankks actual floor space
             requirements - present or prospective. Sound
             business discretion might and often does call
             for rental space and building conveniences
             beyond present requirements.
            'The true test would seem ~tobe ,thatso iong
             as there is archi%.ecturaland substantial
             stru~cturalconnection there is one banking
             house, and the various activit,iesof the bank
             may be carried on in any roomy,or space what-
             soever as the board may authorize, Wheth.er
             such structure crosses 10% lines, or tunnels
             under, or spans over alley or street can make
             no difference. The building includes all of
             its parts.1
                           - 366-
   I   .




Honorable J. M. Falkner, page 3      (M- 82)


            'A comparatively recent opinion of the Attorney
             General supports the text where a garage for
             parking and deposit windows, situated on a lot
             across the street fr m the main building is
             connected by tunnel.E!!!


     1. Op. Atty. General No. O-2691. "If the property is being
purchased by the bank for the good faith purpose of a banking
house, the law is not concerned with the character of the build-
ing, its structural peculiarities, the number of stories, the
number of separate rooms or offices, and the like; these are
matters for the sound business discretion of the Board of Directors.
It would be difficult to find a building which had not been built
to specifications for a bank, that would in all respects be ex-
actly fitted to the demands of a bank purchasing the same. Indeed
it might (be difficult to construct a building to specifications
suited not only to the present needs but to the future needs of
a bank undertaking to construct its own banking house. In the
present case the surplus room, stories, offices and the like, it
appears, may be profitably rented by the bank. We cannot close
our eyes to the fact that in many instances - perhaps in most in-
stances - our better banks occupy their own buildings consisting of
several, sometimes many stories, and much, if not most of the floor
space is not actually used by the bank in conducting its banking
business but is rented out. There can be no valid objection to
this if the major good faith purpose of the acquisition or con-
struction of the building be to provide a banking house for the
institution.'
     2. Op. Atty. General No. v-1046. "The contemplated new
structure, although to be erected across the street from the
original 'banking house', will be physically joined thereto by
a tunnel under the street, which you state will be suitable for
passage back and forth. It is evident that besides being joined
physically, the new structure, including the passageway, will be
in close proximity to the present building. It will be used in
connection with the original building and as a unit will be de-
voted to one general common purpose. It is our opinion that the
two structures will in reality be one and when used in the manner
proposed will constitute the bank's 'banking house'. To hold that
said Article requires deposits to be made in abank's original
building, and not in an addition thereto would sacrifice the real
spirit of the law to pure literalism."

                          -   367-
                                                         .     I




Honorable J. M. Falkner, page 4      (M-   82)

     Under the facts submitted, the entire building is tied
together as a unit with all~utilities, including gas, water,
and electricity and air conditioning, being built into the
entire structure which was constructed at the same time.
     The legislative history of Article 342-501, shows that the
Legislature did not intend by the word "domicile" to limit the
premises which could be owned by a state,bank merely to those
premises which'the bank itself occupies for quarters. Prior to
1925, Article 5l2,,Revised Civil Statutes, prohibited state
banks from investing more than fifty percent (50s) of their
capital or surplus in a "banking house". Acts 1923, page 322.
In 1925, wording of the Article was changed from "banking house".
to "domicile". This change clearly showed that the Legislature
contemplated that the domicile of the bank could include an
area greater than that required to house the banking facilities .
themselves.
     From the foregoing it may be clearly seen that Article
342-501 permits the.acqulsition by a bank of a domicile, but
does not in any way attempt to limit the size of such structure
to a building consisting solely of banking facilities. As point-
ed out In Attorney General's Opinion O-2691:
            11 0 .In many instances - perhaps in most
             instances - our better banks occupy their
             own buildings consisting of several, some-
             times many stories, and much, if not most
             of the floor space is not actually used by
             the bank In conducting its banking business
             but is rented out 0 1 0"
     There is no vertical limitation to a banking domicile. It
would therefore be completely illogical to ho.ldthat a bank may
acquire, as its domicile, excess vertical space but not acquire
excess lateral space, A prohibitionagainst the acquisition of
the one would of a necessity extend to a prohibition of the ac-
quiring of the other,
     Therefore, it is the opinion of this office that the Sharps-
town State Bank will be within legal limitatiorsin purchasing
the property identified on the submitted map as Building 'IF"in
the Sharpstown Center3 Houston, Harris County, Texas,
     This opinion is necessarily limited to the factual situation
presented to this office.

                          - 368-
Honorable J. M. Falkner, page   5   (M-62)



                         SUMMARY
                         -c---m-


           The Sharpstown State Bank will be within
           legal limitations inpurchasing the pro-
           perty identified as Building "F" in the
           Sharpstown Center, Houston, Harris County,
           Texas.




                                            C. MARTIN
                                         ey General of Texas

CCM:lh
Prepared by Charles M. Bardwsll
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Hawthorne Phillips, Chairman
W. V. Geppert, Co-Chairman
Ralph Rash
Jack Sparks
W. 0. Shultz
Houghton Brownlee
STAFF LEGAL ASSISTANT
A. J. Carubbl, Jr.
