Honorable P. Frank Lake

Secretary ofState Austin 11, Texas Opinion No. WW-1463 Re: Whether the Secretary of State should accept and file the application of aforeign national bank for a certificate of authority to transact business in Texas under the stated purpose clause. Dear Mr. Lake: You have requested the opinion ofthis office concerning your authority to accept and file the application ofaforeign national bank (the State National Bank of Texarkana, Arkansas) for a certificate ofauthority to transact business in Texas, for the following purpose or purposes, pursuant to the following provisions ofArticle 1513a, V. C..S. :

“To act as trustee, executor, administrator, or guardian when designated by any person, corporation, or court to do so, and as agent for the performance of any lawful act including the right to receive deposits made by agencies ofthe United States ofAmerica for the authorized account ofany individual. ” While this precise question has not previously been passed onby this office, Opinion No. WW-511, dated October 

### 6, 1958, held that the Secretary ofState should not accept and file an application from aforeign state bank for a certificate of authority to transact business in Texas by qualifyingunder Article 1513a, because ofthe following provisions ofArticle 342-902 ofthe Banking Code of 1943:

“It shall be unlawful for any person, corporation, firm, partnership, association or common law trust:

“(1) To conduct abanking or trust business or to hold out to the public that it is conducting abanking or trust business; or

“(2) To use in its name, stationery or advertising, the term ‘bank, ’ ‘bank and trust, ’ ‘savings bank, ’ ‘certificate ofHonorable P. Frank Lake, page 2 (WW- 1kw)

deposit, ’ ‘trust’ or any other term or word calculated to deceive the public into the belief that such person, corporation, firm, partnership, association, common law trust, or other group ofpersons is engaged in the banking or trust business. “Provided, however, that this Article shall not apply to (1) national banks; (2) state banks; (3) other corporations heretofore or hereafter organized under the laws ofthis state or ofthe United States to the extent that such corporations are authorized under their charter or the laws ofthis state or ofthe United States to conduct such business or to use such term; . . .‘I* Opinion No. WW-511 further held that Article 1513a operates to override or repeal by implication those portions ofArticle 342-902 which would prohibit foreign companies from doing atrust business in Texas or from using in its name the word “trust, ” insofar as such foreign corporations are concerned. This holding was based upon the basic purpose ofArticle 342-902 and its predecessors, which is to prevent the public from being deceived into believing that the entity involved was authorized by law to perform the activities indicated by its name. We emphasize this reasoning by the following quotations from Opinion No. WW-511:

“We call attention to the language inSection 2that it is

. unlawful for ,anyperson, etc. , ‘to use inits name. . .the term. . .“trust” or any other term or word calculated to deceive the public into the belief ,thatsuch person (etc. ).

. . is engaged in the.

. .trust business. ’ We further call attention to the language ofthe emergency clause inSenate Bill 343 ofthe 1957 Legislature amending 342-902 as follows:

“‘The fact that under existing law the people ofthis state are subject to misleading advertising and other deceitful practices calculated to deceive the public into the belief that certain unauthorized persons or *Emphases throughout are supplie,d.Honorable P. Frank Lake, page 3 

### (WW-1463)

groups ofpersons are under the strict supervision of the State Banking Department, when infact the protection afforded by strict supervision does not exist, creates an emergency. . .’

“It is apparent that the prohibition against using the name

‘trust’ is directly tied inwith and apart ofthe prohibition against

‘conducting’ or to”hold out.. .that it is conducting’ atrust business. The evil legislated against inSection 2ofArticle 342-902 was the deception to the public which occurred when a company used the name ‘trust’ in its title when infact itwas not entitled to engage in the trust business. That evil will not occur in the case of aforeign corporation obtaining apermit under the terms of [Article 1513a] as such a corporation would be authorized to engage in the trust business andwould not be deceiving the public byusing the name ‘trust’ in its title. ” By substituting the word “bank” for ,t’trust” in the mater~ial just quoted, it becomes obvious that the same reasoning applies to prevent the use ofthe word “bank” by aforeign corporation not authorized to engage in the banking business in Texas. This result and the prohibition against it is succinctly expressed in the following paragraphs quoted from Opinion No. WW-511:

#I[ Article 1513a] should be limited in its overriding effect to the subject matter above, there being no provision in [Article 1513a] which would allow aforeign corporation to come into the State and do abanking business. The use ofthe term ‘bank’ in the title of such a corporation would be deceptive andwould violate Article 342-902.

“In answer to your first question we hold that aforeign corporation with the name ‘Bank’ in its title may not obtain apermit to transact business inthis State. ” The applicant considered in this opinion, aforeign national bank, urges that Opinion No. ,WW-511 does not apply to it because ofthe exemptions contained in the second paragraph ofSection 2ofArticle 342-902, quoted above. We are ofthe opinion, however, that this contention is without merit for the reason that the exemptions there listed apply only to national banks and other corporations organized under the laws ofthe United States, which are located within the State of Texas, and do not purport to exempt foreign corporationsHonorable P. Frank 

### Lake, page’4 

### (WW- **1463)**

ofthis nature from the deceptive practices prohibition contained in Section 2ofArticle 342-902. This is apparent from the following provisions of Articles 342- 101 and 342-908:

“This code provides acomplete system oflaws governing the organization, operation, supervision and liquidation of state banks, and to the extent indicated by the context, governing private banks and national banks domiciled in this State;”

“It is not the intention ofthe Legislature in the enactment ofthis Code, to discriminate bettieen state banks and national banks, and, to the extent that the State of Texas has power to legislate with reference to national banks, each provision ofthe Code shall apply alike to state banks and national banks domiciled in this State. Acts 1943, 48th Leg., p. 165, ch. 97, subch. IX, art. 8. ‘I Obviously, the Legislature intended to exempt from the prohibition ofArticle 342-902 national banks and other corporations organized under the laws of the United States, domiciled in this State, having the right to exercise the powers indicated by their names; but, equally obvious is the conclusion that the Legislature intended to prohibit any corporation from using any word or any combination ofwords in its name which would tend to mislead the public into believing that the corporation was authorized by law to perform acts which it infact did not have the power to perform.in Texas. Such anintent is supported by~opinion R-2076, dated June 8, 1950, which held that the Secretary of.State was authorized to grant a charter to the Bank Investment Company, Inc. (organized under Article 1303b), since the use of such name would not indicate to the public that the corporation was conducting abanking business. Opinion No. .R-2076 held that Article 342-902 should not be given aliteral construction which would lead to absurd results s and gave the following examples of corporate names which might be inviolation ofthe law under such a strict construction: Cut Bank Refining Company; Red Bank Refining Company of Illinois; Bankers Life Assurance Company; Bankers Life Company; and Dallas’ County Blood Bank. However, Opinion R-2076 concluded as follows:

“This opinion is not to be construed as holding that a charter or permit may be granted by the Secretary of,State to any corporation where the use of any ofthe forbidden words-

Honorable P. Frank Lake, page .5 (WW- 1463)

in the corporate name would violate the provisions ofArticle 342-902 by enabling such corporation to hold itself outsto the public as being engaged in abanking business. 11 Since there is no provision oflaw which authorizes aforeign corporation to come into Texas and do abanking business, we are oftthe opinion that you are prohibited, by the terms ofArticle 342-902, from accepting and filing the application ofaforeign national bank for a certificate of authority to transact business in Texas under the purpose clause ofArticle 1513a.Although the foregoing is sufficient to require your refusal ofthe application, we desire to reply to the applicant’s contention that, having been granted power to act as trustee, exe,cutor, administrator, guardian of estates and in other fiduciary capacities under 12 USCA 248(k), it may now come into Texas and conduct atrust business under Article 1513a. Title 12, USCA, Section 248(k), reads, in part, as follows:

“The Board,of Governors ofthe Federal Reserve System shall be authorized and empowered: l’(k) To grant by special permit to national banks applying therefor, when not in contravention of state orlocal law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates oflunatics, or in any other fiduciary capacity inwhich State banks, trust companies eor other corporations which come into comoetition with national banks are-permitted to act under the laws ofthe State inwhich the national bank is located. “Whenever the laws of such.State authorize or permit the exercise of any or all ofthe foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed tobe in contravention ofState or local law within the meaning ofthis chapter. ‘1 From a reading ofthis section, it is apparent that the grant by the Board of Governors is limited to the state ‘Iinwhich the national bank is located, ‘1andHonorable P. Frank Lake, page 6 (WW-I&3,)

therefore, such a grant to a national bank located in Arkansas cannot support its attempt to conduct atrust .business in Texas. Boatmen’s National Bank ofSt. Louis v. Hughes, 385 Ill. 431, 53N.E. 2d 403, 153 ALR 402 (1936).Since the applicant represents that it desires to act in afiduciary capacity in the State of Texas , we direct its attention toSection 105a ofthe Texas Probate Code, (Acts 57th Leg., R.S., 1961, Ch. 31, p. 46).

SUMMARY The Secretary ofState should not accept and file the application of aforeign national bank for a certificate of authority to transact atrust business in Texas under the terms ofArticle 1513a, V. C.S.

Yours very truly, WILL WILSON Attorney General of Texas



# A%%sb Dudlev b. McCalla Assistant Attorney General DDM:lmc APPROVED: OPINION COMMITTEE: W. V. Geppert, Chairman Bob E. Shannon J. C. Davis Arthur Sandlin REVIEWED FOR THE ATTORNEY GENERAL BY: Leonard Passmore