Mr. J. M. Falkner OpinionNo. 

### WW-5l9

Commissioner Department of Ranking Re: Whether savingsand loan assoAustin, Texas ciation commencedbusiness within six months from the date of the issuance of certificate of authorityby the Ranking Commissioner of Texas, as required by Article 881a-4,V.C.S., and whether saidArticle is conDear Mr. Falkner: stitutional.

You have requested the opinion of this officebased upon the following factual situation:

In the latter part of 

### 1957an application for charter for a savings and loan associationwas filed with the Department of Banking. An investigationwas made February 26 

### 1958 theArticles of Association and 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 associationmade application to the Federal Savings and Loan Insurance Corporation for insurance of its shares through the Federal Home Loan Hank of Little Rock throughwhich applications for insuranceare processed. Upon receipt of the application a Vice-president of the Federal Home Loan Rank of LittleRock instructed the associationnot 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 associationnotified the Ranking Department that it would commence business on August 18th. The Ranking Departmenthaving been advised that the association had not actually commencedbusiness but had merely opened an office, sent a departmental examiner to investigate the situation. On September 11, 

### 1958,the departmental examiner completedhis 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 associationhad not opened share savings accounts or sold share certificates, or issued temporaryreceipts 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 beenmade 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, togetherwith receipts for payment of certain expenses incurred.

(4) No office supplies, temporaryreceipt books or certificates other than a book of permanent stock certificates had been purchased or acquired by the assoclationpnor had the association purchased or acquired bookkeeping equipment or other such equipment with the exceptfon of a corporate seal
or furniture and fix ures 1 other than a desk, four chairs, an d
a filing cabinet located in the "office"which were the property of the organizers.

(5) No personnelnecessary 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 officerhad been employed.

(6) The name of the associationwas not permanently placed on the premises of the office building;however, two placardswere taped to thewindows of the office stating that the premiseswas the temporaryhome of the association,and the associationhad not advertised in anyway 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 certainnecessary expendi~- turesmade by the association in connectionwith 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 commitmentsmade.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 Presidentand attorney for the association stated that i.?z was his understandi,n:: that if the association transactedany business of any nature before the insurancewas approved it would be impossible thereafter to obtain such approval, as shown by a letter from the Federal Home Loan Bank in which the associationwas advised not to transact business or advertise the possibility of future in::urante of accounts until the application for insurancehad been approved. He further stated that he was trying to follow the instructions of the Federal Home Loan Bank offi.cial by not transactingbusiness of any nature before receiving the approval of the application for insurance.

Based upon the foregoing fac.tual situationyou have requested our opinion as to (1)whether the associationdid "commencebusiness'* within six months from the date of the issuance of its certificate of authority to do busi~ness as re-. quired by the provisions ofArticle 88ls&, Vernon9s Civ:.!. StatutesE.

and (2) is Article 8817,-%, constitu ional? Ve,rnon 1sCi.vi.'l

Statutes,

Article 88la-4,V.C.S., reads as follows:

When the Banking Commissionerof Texas shall have approved the organization certificateand the proposed by-laws and shall have issued the certificate of such approval and filing, ft shrill. then issue a certificate of authori.tyto do business, providing that when any building and I.oanassoc:lation holding a charterunder the 1,~~s of this State shall fail to commencebusiness 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 sixmonths from the da,teof the issuance of its certificate of authorit.y, the associati~on shall a facto be dissolved and its corporateexistence 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 tileland." 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

rcrci. 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 ccnstjtrtfonai pr:ovLsions above referred to Itwill be noted t:::at it is specificzlly stated in -the article that i.fthe :sssocfakion::n:i.:ls ?c 'tco:raence

business" l~jitliip,

six months from the -i.z ';eof ,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 e c,:. j. 5: 5 olT.Te CL brl rdi *"lout further execn*I.ce ur Jill! icj.2.l act~:l3:1. The questionwhich arises is, sirlce tr~r_~ ~o~~pc.!r,~

?:a! i.s

$F~; facto ,?issolvecl

l!itliout

r:nyfurther executive 3~ ji:c:~cin:~ 2,5- termination,who adjucXcates o!: ffnds, under $ given star- "f fct:s, xhether the associationhas "commenced>::i~!nes~'~ ~:rZ.':!:,ir: the t&e prescribed?

Clearly, by thevery term+ of cb,e.j X,:J i;:.::E;~jp

t:.~c B-,nking

Commissioner of Texas is w:thout,32+;,iio ;' j,, t;rt:y::i ecj;-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 provisionsof the 2rti.cY.e -a:: n.ot be eo.cstrueG Lo be "thedueCOUJ~.,- -w of the 1;~ of tl:eI,LT~,~' ; then manifesi;ly, this statuteattempts to deprive the ss;ockt,lono' 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.

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 ,theIssuance of the certificate of authority ir violative.of the provisions of Section 19, Article I of the Constitutionof 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 that the provi.sions of the statute are violative of s.;ch constitutionalp,rovisions, it is unnecessary to answer your first questionas to whether, under the factual situation stated above, the association ?md
or had not "commencedbusiness"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 "commencebusiness"within sixmonths from the date of the issuance of its certificateof authority the association shall be iDso facto dissolved and its certificate of incorporationdeclared null and void without further executive or judicial action, violates the provisions of ti-e Fifth Amendment to the Constitutionof the United S.i;ates, and Section 

### 1-9,

Article I, of the Constitution of Texas, and is therefore unconstitutionaland 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