## 627

OFFICE OFTHE ATTORNEY GENERAL OFTEXAS
AUSTIN 0-c.- A-- . . i

Ronoroblo J. T. ?Sdillin / " D3-putyC0rsdss10ner Depirrttint ofBank@ Austin, mxas

Dear Xr. KcRillin;
Re# Whethe&?-raot &'ticle 554

,/' .,--~where'thebank*sUloan90thartisdwl SxcessiYe lo&all, is 

# partic++

Webeg ~63s.kno&A.g& &ceipt ofyour letter of W3ruary 11, 1341, reqwpi.ng~ap opinion, as follywst

/" /', '. .; OX&',:# c&rse‘>.\are a&'& ,%hatthe Reconstruotidm Wuanoe 323utaX.t& @qrporat~on,24 PederaL instru-

+ing plrsuarrf-to Fsdersl iStatute, is.,offerin~fa~nciqS a~&istance to,business

rough 

### i+e *p3bution of participation agee- ~t~execut~R~@&J?fym I&00, a~eom,of wH&QXs hereto attichod. The me+ch&cs of the pratip&p6 I,undyrstand then, aro'thy3ez :'
,nA\bushess' m~desiri& 8 subetantial loan

$l+ie Reoonetruction Finsnoe Corporation for **a:;LbanJ~** The Corporation generally i6 unvilling to -0 loans direotly.. Inetead, it sugg:eststo &q>~orpower that he apply to 1~s local~.bank l'orthe 1osnnnB that the R8oon6truation Binsnoo Coiyoration to~assist~himln obtaining the lOan will execute a particiption'i3greement in favor of'the bank on the form above ~entionad, agreeing upon demand to purchsse astipulated peroentage of the loan upon being requested to do soby the bank. Vith these facts in zlnd, Irespeotfully a6k whether or **not** there is aviolation under Arti010 554 of the ,3?enalCode of Texas in the following fact situation1

## 628

lion.J. T. ?&%illin -Pago 2

*A State banking corporation has a loan limit of 0,000.d0.

$ It makes aloan to an individua **fork $bojooo.oo**  **aad Skidk3ZU3OU6ly**  with the loan%he R.B.C. executes aparticipation agreement on the Porm above mentioned, agreeing Ondemand t0 purchase a $20,000.00 participation in the loan..

It is the opinion of this deprtmnt that the ~articipstion plan outlined by you, and more specifioally
~mvn in the participation agreement, form ofwhich accom**pmie~** your letter, does not relieve the overloan of a Mnk from the prohibition oontained in Penal Coda, Article 554.
Article-g84 i6 a6 fOlloW6: '-~

"No incorporated bank or trust company chartered 

### underthe laws of this State shall loan it6 money, direotly 

### or indireotlp, or permit any individual, private corporation, company orfirm to-becolne at any time indebted or liable to it in a sum ercesding twontyfive per cent of Its cayiltalstoak actually p6id in and surplus, or permit a lina of loans 

### orcredit6 to any greater amount to any individual, private corporation, company or firm. Any agent or officer of any incorporated bank or trust company who violates any provision of this Artiole shall be fined not 11.36~ than One RUndred nor more than Nvo Hundred Dollars, orbe imprisoned in jail 

### fornot less than thirty nor more than ninety days, or both. All loans tomanibers ofany unincorporated company or firm shall be considered as if they

### were loans to such company or firm in determining the limitation here prescribed. The discount of commercial orbusiness paper actually owned by the person negotiating the same shall not be oonsidcred a6borrowed moneyg a permanent surplus, the setting apart ofwhich shall have been oortifiad to theRanking Cornmissioner and which cannot be diverted without due notice to and consent of said officer, may be taken and COnsiderod as apart Of the Capitol stock of this article. Inno event shallRon. J. l'.hchillin -Page 3

any such loan exoeed twenty-five per cent of the authorlsod capital stock and oertifiod surplus. Frovidsd, howevsr, that the word *corporation*
or any other word 

### or torn as hereinabwe used shall not be taken to include orto refer toa municipal corporation, county or any district croated for sohool or any other State or local public purpos0.w

The vice ofan overloan, where there is one, exists from the smment the transaction is completed and tllcbank has parted with its money, and the agreement of another to purchase the excess portion of 6uch loan, or thaentire loan, as to that, does not mge the transaction of invalidity.



### Nomover, the form of partioipation agreemsnt under consideration isnot even anunconditional agreecant upon the part of the Reoonstruotion Finance Corporatien to purchase apartioipsting interest in the loan. 

### Theagreemnt does purport to lurchas for cash from the ?JZZ&aparticipation interest, but it recites~

'Subject to the following tem6 and conditions: 8 0* (2) Upon five days'~written 

### notice RPGmayat its option at any tim0 purchase its agre'edparticipation in said loan (inwhich event bank shall simultan0ously is**8~3 ta**  RF0 a partioipation certificate on RJ?CForm L-$01) or said loan

### in its entirety; and upon five (5)days' 

### writhn notice bank may 

### at its option any time purchase RFC~s interest in said loan.'

It is thue plain the instrument contemplates that the lurchas of the participation interest in the loan is tobe at the option of the Reconstruction finance Corporation.

In construing the law, we are not

### to be swervecl by thehardships that may follow --we are conoernod only with th0 true interpretation of the statute. We would notbe ju6tifiocZ in attempting torelax th0 rigors of a*

. ifon*J. T. Iricxlllin-Page 4

statute where the statute Itself is plain and wigUOUE.

7ol-ytruly yours

Assistant

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