# THE .LTJXBRNEY GENERAL OP%-JKXAS'

The Honorable Jerry (Nub) Donaldson Chairman, Financial Institutions Committee House ofRepresentatives State Capitol Building Austin, Texas Opinion No. H- 723

Re: The effect ofsection 6.14 of the Texas Savings and Loan Act upon the authority ofpolitical subdivisions to invest surplus funds in savings and loan, Dear Representative Donaldson: associations.

Onbehalf ofthe House Standing Committee on Financial Institutions you have asked:

In view ofSection 6.14 ofthe Texas Savings

and Loan Act (Art. 852a R.C.S.), are there any restrictions upon the authority ofpolitical subdivisions ofthis state to invest surplus funds in savings accounts fin savings and loan associations operating inthis state?

The Texas Savings and Loan’Act provision towhich you have referred contains very broad language, It reads in part:

Administrators, executors, guardians, trustees and other fiduciaries ofevery kind and nature: counties, cities, towns and all other political subdivisions or instrumentalities of this State; insurance companies doing business in this State; business and nonprofit corporations; charitable or educational corporations
or associations; banks,, credit unions and all other financial institutions are hereby specifically authorized and empowered to invest funds held bythem in savings accounts ofany association operating under this law or any Federal association.

. . .

p. 3094The Honorable Jerry (Nub) Donaldson, page 2 (H-723)

Ifapplied in its most comprehensive sense. the foregoing language would authorize fiduciaries, trustees, and public officers to invest the funds entrusted to them in savings and loan association savings accounts without regard to limitations imposed bythe Texas Probate Code, the Texas Trust Act, or laws governing the selection ofdepositories for public monies. However, we do not believe that result was intended nor that the provision
can be given that effect.

OnJanuary 1, 1964. the Texas Savings and Loan Act, article 852a. V.T.C.S.. succeeded and replaced former article 881awhich governed building and loan associations (Acts 1963, 58th Leg., ch. 113,p. 269). The title ofthe bill enacting the new law provides:

An Act arranging the Statutes ofthis State affecting savings and loan associations and their operations in appropriate Chapters and Sections into a consistent whole and under a single Act; defining certain terms; providing amethod of forming associations; stating the powers, duties and qualifications ofdirectors, officers and members ofsuch associations; fixing the corporate power thereof; regulating the loans, investments and ownership ofreal property by such associations; providing for. savings accounts and fixing rights and obligations in regard thereto; providing for the computation ofearnings, transfers to loss reserves. dividends and surplus of such associations; providing for the supervision and regulation ofsuch associations, their books and records, accounting practices, statements, reports. audits and examinations: providing for discontinuance ofviolations and receivership; limiting the rights offoreign associations to do business as asavings and loan association in this State; providing for conversion into Federal associations; providing for conversion into State associations and reorganization. merger, consolidation and voluntary liquidation of such associations; exempting savings accounts from

p. 3095The Honorable Jerry (Nub) Donaldson, page 3 (f-I-723)

securities laws: authorizing acknowledgements to be taken before members and employees of associations who are notaries public; providing for closing ofplaces ofbusiness; permitting associations to act toavoid losses; providing for fees to be collected by savings and loan’ commissioner: requiring all associations authorized to conduct a savings and loan business to conform to this Act; providing that outstanding shares. stock, share accounts and investment certificates (except Permanent Reserve Fund Stock) shall be considered as savings accounts; prohibiting the issuance of stock or shares not authorized by this Act: providing for ad valorem taxation ofthe property ofsuch associations; permitting rule-making procedures to be instituted under certain conditions: providing hearing procedures; providing for judicial review: providing penalties for slander ofan association, embezzlement, declaring greater dividends than earned, failing to comply with law. suppressing evidence and disclosures by examiners: repealing all laws in conflict herewith; providing for severability ofthe different Chapters or parts ofChapters so that the unconstitutionality ofone or more shall not affect the remainder of the Act; providing an effective date: and declaring an emergency.

There is noindication contained in the title of such asweeping change in the law regarding the investment ofentrusted funds as the above-quoted language from section 6.14 ofthe Act would imply. Furthermore, that section ofthe Act, contains this additional language:

Ifupon the effective date ofthis Act the shares and share accounts ofassociations operating under Article 881aofthe Revised Civil Statutes of 1925, as amended, are legal

p. 3096The Honorable Jerry (Nub) Donaldson, page 4 (H-723)

investments for any particular business, organization. corporation, fiduciary or political subdivision, the savings accounts ofassociations subject to terms ofthis Act shall be deemed to be legal investments to the same extent as such shares and share accounts.

This last sentence of section 6.14 could perhaps be given aninterpretation consistent with abroad construction ofthe earlier language, buta statute
sh**ou** 1d’ be **c o** nstrue d in amanner that will render it constitutional, if possible. 53Tex. Jur. 2dStatutes 5158. A broad interpretation ofthe section 6.14 language would cause the title ofthe enactment tbbe misleadingly

narrow and, in our ooinion. unconstitutional. Tex. Const. art. 3. 635: -_ C. Haymon Construction Company v. American Indemnity Co., 471S.W. 2d 564 (Tex.Sup. 1971;Harris County Fresh Water Supply District No. 55 v. Carr, 372 S.W. 2d 523 (Tex. Sup. 1963); 53Tex. Jur. 2dStatutes 559.

In our opinion, section 6.14 ofarticle 852a. V.T. C.S., was meant - and should be construed - only to signify that after passage ofthe Act savings accounts in savings and loan associations would be legal investments for those fiduciaries and public bodies permitted by other law to invest in similar securities. See ed. V.T. C.S. arts. 836and 6243~5 23; Prob. Code $389; but see V. T. CT arts. 2544 et., 2559 et se% We do not believe the provision, in itself, gives any political subdivision apower tomake investments unaffected by legal restrictions found elsewhere in the law of this State.
Accordingly, we answer your question inthe affirmative. Without examining the entire body oflaw relative to financial transactions by all the various types ofpolitical subdivisions, it is impossible for us to specify all legal restrictions which might apply to the investment authority of such entities, butwe call toyour attention article 3, section 52ofthe Texas Constitution, and the statutes previously noted.

p. 3097The Honorable Jerry (Nub) Donaldson, page 5 (H-723)

SUMMARY

Section 6.14 ofarticle 852a, V. T. C.S., the Texas Savings and Loan Act, does not authorize political subdivisions to invest in savings accounts ofsavings and loan associations without regard to leeal restrictions found elsewhere upon the disposition ofpublic monies.

APPROVED: Very truly yours,

Attorney General of Texas

DAVID M. WNDALL, Fir& Assistant

Opinion Committee

p. 3098