THE .LTJXBRNEY GENERAL 

OP%-JKXAS' 

The Honorable Jerry (Nub) Donaldson 

Chairman, Financial Institutions Committee 

House of Representatives 

State Capitol Building 

Austin, Texas 

Opinion No. H- 723 

Re: The effect of section 6.14 

of the Texas Savings and 

Loan Act upon the authority of political subdivisions to invest surplus 

funds in savings and loan, 

Dear Representative Donaldson: associations. 

On behalf of the House Standing Committee on Financial Institutions you have 

asked: 

In view of Section 6.14 of the Texas Savings 

and Loan Act (Art. 852a R. C.S.), are there any 

restrictions upon the authority of political subdivisions of this state to invest surplus funds in 

savings accounts fin savings and loan associations 

operating in this state? 

The Texas Savings and Loan’Act provision to which you have referred contains 

very broad language, It reads in part: 

Administrators, executors, guardians, trustees and other fiduciaries of every 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 by them in savings accounts of any 

association operating under this law or any 

Federal association. . . . 

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

If applied 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 by the Texas Probate Code, the Texas 

Trust Act, or laws governing the selection of depositories for public monies. 

However, we do not believe that result was intended nor that the provision 

can be given that effect. 

On January 1, 1964. the Texas Savings and Loan Act, article 852a. 

V.T.C.S.. succeeded and replaced former article 881a which governed 

building and loan associations (Acts 1963, 58th Leg., ch. 113, p. 269). The 

title of the bill enacting the new law provides: 

An Act arranging the Statutes of this 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 a method of 

forming associations; stating the powers, duties 

and qualifications of directors, officers and 

members of such associations; fixing the corporate power thereof; regulating the loans, 

investments and ownership of real property by 

such associations; providing for. savings accounts 

and fixing rights and obligations in regard thereto; 

providing for the computation of earnings, transfers to loss reserves. dividends and surplus of 

such associations; providing for the supervision 

and regulation of such associations, their books 

and records, accounting practices, statements, 

reports. audits and examinations: providing for 

discontinuance of violations and receivership; 

limiting the rights of foreign associations to do 

business as a savings 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. 3095 
The 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 of places of business; permitting 

associations to act to avoid 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 of the 

property of such associations; permitting 

rule-making procedures to be instituted under 

certain conditions: providing hearing procedures; providing for judicial review: providing penalties for slander of an 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 of the different Chapters or 

parts of Chapters so that the unconstitutionality 

of one or more shall not affect the remainder of 

the Act; providing an effective date: and 

declaring an emergency. 

There is no indication contained in the title of such a sweeping change in the 

law regarding the investment of entrusted funds as the above-quoted language 

from section 6.14 of the Act would imply. Furthermore, that section of the 

Act, contains this additional language: 

If upon the effective date of this Act the 

shares and share accounts of associations 

operating under Article 881a of the Revised 

Civil Statutes of 1925, as amended, are legal 

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

investments for any particular business, 

organization. corporation, fiduciary or 

political subdivision, the savings accounts 

of associations subject to terms of this 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 an interpretation 

consistent with a broad construction of the earlier language, but a statute 

s h ou 1 d’ b e c o n s t rue d in a manner that will render it constitutional, if 

possible. 53 Tex. Jur. 2d Statutes 5 158. A broad interpretation of the section 6.14 language would cause the title of the enactment tb be misleadingly 

narrow and, in our ooinion. unconstitutional. Tex. Const. art. 3. 6 35: -_ 

C. Haymon Construction Company v. American Indemnity Co., 471 S. W. 2d 

564 (Tex.Sup. 1971; Harris County Fresh Water Supply District No. 55 v. 

Carr, 372 S. W. 2d 523 (Tex. Sup. 1963); 53 Tex. Jur. 2d Statutes 5 59. 

In our opinion, section 6.14 of article 852a. V. T. C. S., was meant - 

and should be construed - only to signify that after passage of the 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. 836 and 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 a power to make 

investments unaffected by legal restrictions found elsewhere in the law of 

this State. 

Accordingly, we answer your question in the affirmative. Without 

examining the entire body of law relative to financial transactions by all 

the various types of political subdivisions, it is impossible for us to 

specify all legal restrictions which might apply to the investment authority 

of such entities, but we call to your attention article 3, section 52 of the 

Texas Constitution, and the statutes previously noted. 

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

SUMMARY 

Section 6.14 of article 852a, V. T. C.S., the 

Texas Savings and Loan Act, does not authorize 

political subdivisions to invest in savings accounts 

of savings and loan associations without regard to 

leeal restrictions found elsewhere upon the disposition of public monies. 

APPROVED: 

Very truly yours, 

Attorney General of Texas 

DAVID M. WNDALL, Fir& Assistant 

Opinion Committee 

p. 3098