Mr. J. M. Falkner Opinion No. WW-5l9 

Commissioner 

Department of Ranking Re: Whether savings and loan assoAustin, Texas ciation commenced business 

within six months from the date 

of the issuance of certificate 

of authority by the Ranking 

Commissioner of Texas, as required by Article 881a-4, V.C.S., 

and whether said Article is conDear 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 charter for a savings and loan association was filed with the 

Department of Banking. An investigation was made 

February 26 1958 the Articles of Association an d F$LSs were 

approved an d filei, and a Certificate of Authority to do business was issued to the association. 

On June 6, 1958, the association made application to 

the Federal Savings and Loan Insurance Corporation for insurance 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 investigate the situation. On September 11, 1958, the departmental examiner completed his examination of the association 

as of August 26, 1958, which examination revealed the following 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 receipts for money received other than for permanent capital 

stock. 

(2) No loans of any type had been made or any provisions 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 acquired. 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 fix 1 ures other than a desk, four chairs, an d 

a filing cabinet located in the "office" which were the property 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':OO P.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 permanent 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 acquisition of its "office , " and the other necessary expenses of the 

organizers. 

(8) The examiner found as a fact that no actual savings and loan business had been transacted, and that no deposits 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::urante 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.cial by not 

transacting business of any nature before receiving the approval of the application for insurance. 

Based upon the foregoing fac.tual situation you have 

requested our opinion as to (1) whether the association did 

"commence business'* within six months from the date of the issuance of its certificate of authority to do busi~ness as re-. 

quired by the provisions of Article 88ls&, Vernon9s Civ:.!. 

Statutes 

E. 

and (2) is Article 8817,-%, 

constitu ional? 

Ve,rnon 1s Ci.vi.'l Statutes, 

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 certificate of such approval and filing, ft shrill. then 

issue a certificate of authori.ty to do business, 

providing that when any building and I.oan assoc:lation holding a charter under the 1,~~s of this State 

shall fail to commence business within six months 

from the date of the issuance of ~the certificate 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 judicial action," 

This article clearly provides that if the associa,!ion 

does not tlcommence business" within six months from the da,te of 

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 Constitution of Texas provides that "no citizen of this State shall? 
I@-. J. M. Falkner, page 4' (wW-~13) 

be c~eprived of e . . property D O O except b;? due conrse of 

tl:~e law of tile land." This constltuti0na.l provisio:;: corre.- 

s?ords to the Fifth Amendment to the CorAst,i~r-Jtion 0,' tz;e 

United States. It is not deemc?d nece?s-,ry rcr c i. te a::;~ ,a',.l thority to the effect that a corporation, or in .thfs C::je a bu.L'lding a>>; l.oan association, which has been duly :r;ln%ed a char.+er 

by .>roper authorities of the State of Tex&s, is a citizen o!' 

t2ii:j St::te within the meaning of the two ccnstj trtfonai pr:ovLsions above referred to It will be noted t:::at it is specificzlly stated in -the article that i.f the :sssocfakion ::n:i.:ls ?c 

'tco:raence business" l~jitliip, sixmonths from the -i.z ';e of ,t~e 

i.sslznce of tke certific,zte of zilthority by the Da:-king C~;iz?k;- 

sioner of the State of Tcxzs, the a.ssoci.~.?;ic~r? &::i';:I L.ac.; f:Lci~ 

11 ec,:. j. 5:5 olT.Te CL brl * "lout rdi further execn*I.ce ur Jill! icj.2.l act~:l3:1. 

The question which arises is, sirlce tr~r_~ ~o~~pc.!r,~ ?:a!i.s $F~; 

facto ,?issolvecl l!itliout r:ny further 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,:J i;:.::E;~jp t:.~c 

B-,nking Commissioner of Texas is w:thout, 32+;,iio ;' j,, t ;r t :y ::i e cj ;-i e 

whether the association, under a given state -)f r,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'?orz i;raritec %!- 1,:~ t,ha 

State of Texas in manner and form prov?.ded by law, an? (1~‘ of.fi,- 

EE. 

court, or otber tribunal 5s empo\8erecl, to ceterni.r.e t':::i,;: 

Its ch,arter and its certificate of authority ~0;;s" J~?T.:!:E 

property, and the provisions of the 2rti.cY.e -a:: n.ot be eo.cstrueG 

Lo be "the due COUJ -w ~., of -the 1;~ of tl:e I,LT~,~' ; then manifesi;ly, 

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.o eve:;':7 c:t:~zen. 

It is the opinior? o., +' this office t!!a? the r.l;a.tui.e 

Article ?&a-k, Vernon's C!l.vil. Statute2 lwh'ich prolrides f,~~'iWe 

m fad0 dissolution and fizfeitlzr Oh I'm _, ,,,. . ,? +, .~, I:' the CCI. .,lf.~ci.~e or ucorporation of the association for fajl:..,!1g to 'lcommer~ce 't'll,ci~n-:s:," 

within the period of six months ?rom thy date of ,the Issuance 

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~tion of the Ur:ited States. 
Mr. J. M. Falkner, page 5 (WW-519 ) 

In view of the holding tha t the provi.sions of the 

statute are violative of s.;ch constitutional 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~bed by 

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 authority the association shall be iDso facto dissolved and its certificate of incorporation declared 

null and void without further executive or judicial 

action, violates the provisions of ti-e Fifth Amendment 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 

CKR:wb 

APPROVED: 

OPINIOM COMMITTEE 

Geo. P. Blackburn, Chairman 

J. C. Davis, Jr. 

L. P. Lollar 

Riley Eugene Fletcher 

C. EC. Richards 

Assistant 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: W. V. Geppert