r 

Bi: 

October 28, 1958 

Honorable J. M. Falkner 

Banking Commlssioner 

Capital National Dank Building 

Austin, Texas 

Re: Attorney General Opinion 

No. NW-412 

Dear Ccmmissioner Falkner: 

At the request of many interested banks we 

have extensively reviewed Opinion No. WW-412 and have 

concluded that it is a correct analysis of the law. 

Therefore, this is to advise you that we do 

not intend to aiter the conclusions reached in the opinion. 

WW:csb 
Aun~rni ~.TEXAR 

April 9, 1958 

Hon. J. M. Falkner Opinion No. NW-412 

Commissioner 

Department of Banking Re: Are banking facilities of 

Austin 14, Texas various national banks mal~ntained on federal military establishments and at Veterans 

Dear Mr. Falkner: Administration hospitals illegal? 

You have requested our opinion as to the legality 

of the maintenance of banking facilities by various national 

banks. The issue raised concerns chiefly Article 3, ,_I 24 hapter 

IX of the Texas Banking Code, as amended Act? 1957, 55th 

Legislature, page 448, Chapter 220, Section 3. (Art!.:le 342- 

903 V.C.S.), which prohibits state and nal;hxm.l :omks from 

maintaining branch offices and from cash%ng cheGks or receiving deposits except in its own banking house. 

As we understand the facts, these facilities are 

located in Texas on some eighteen different bases o.f the 

Army, Navy and Air Porte and at a Veterzi, u...,,,..... Am ._ -., . -, j :.l " ':I <." ,., 7 (I .L c_ 

hospital located in Temple, Texas. pi,3s* :'h,:;.j.,.i;~fe$g p:",;,- 

vide services in accordance with the re&;il!.ii;,f<,~i~ ,;." ?::e Air 

Force, A-rmy and Navy, as the case may be. 1 ‘xe ';s-;<df";$ -;;ie 

Veterans A&ni,nistration operation is s~‘~3,t;~.ri-‘111~;L1S.:~‘ “.?ikLcal) . 

The following is a listing of the services z.9 ;:-.t r>.f;li; ir the 

applicable Air Force Regulation: 

"(1) Provision for paying an5 :deceF~iE:;g 

facilities for officers, airmen ar8 'civf:.ian 

employees of the Department of the Air Force 

acting in their individual capacities. 

"(2) Provision for paying and receiving 

facilities for custodians of non-appropriated 

funds of the Air Force, acting in such capacity. 

"(3) Furnishing cash to finance officers 

of the Air Force, including payroll requfrements when determined desirable. 
Hon. J. M. Falkner, page 2 (NW-412) 

"(4) Accepting deposits for finance officers 

of the Air Force for credit to his official account 

with Treasurer of the United States. 

“(5) Selling savings bonds and stamps for 

cash. 

“(6) Selling banking paper, such as cashier's checks, bank money orders and travelers' 

checks. 

"(7) Redemption of savings bonds." 

Article 3, Chapter IX of the Banking Code provides: 

"'Art. 3. Branch Banking Prohibited. No 

state, national orprivate bank,shall engagzin 

business in more than one place, maintain any 

branch office, or cash checks or receive deposits 

except in its own banking house. . ." 

supplied). 

(-Emphasis 

In each case, these facilities are maintained separate and :... 

apart from the banking house of the respective national banks 

concerned. The prohibition of the statute is clear and unambiguous as to the cashing of checks and receipt of deposits. 

It is immaterial that the facilities are located on military 

reservations on which the State of Texas may in some instances 

have ceded jurisdiction, for the prohibition runs against the 

parent banks which in each instance is clearly located within the state's jurisdiction. It is unnecessary to decide 

whether the prohibition of the statute against engaging in 

business at more than one place or maintaining a branch office applies to the situation at hand, for the cashing of 

checks'and receipt of deposits for and on behalf of military 

personnel and civilian employees in their individual capacities is clearly proscribed by Article 3, Chapter IX of the 

Banking Code. Accordingly, the balance of this opinion will 

be limited todiscussion of that activity. 

The question has been raised as to the scope of the 

StatelS ~authority to regulate the activities of national banks. 

Can a'state prohibit a national bank from engaging in branch 

banking activities? We think this question was determined in 

the case of First National.Hank in St. Louis v. State of Mish hit 

tlonal bank could not'%th'imEu%iG viol% t;i 

sou+i, 263 U.S b40 ( 23) 1 d th t 

sta:e %.%te 

which provides that "No bank shall maintain in this state a 
Hon. J. M. Falkner, page 3 (WW-412) 

branch bank or receive deposits or pay checks except in its 

own banking house." Subsequent to the Court's decision in 

this case; Congress chose to enact the language now,.found~.in 

12 USC 36, which reads as follows: 

"The conditions upon which a national 

banking association may retain or establish 

and operate a branch or branches are the 

following: 

11 .(c) A national banking assoclatlon may; with the approval of the Comptroller of the 'Currency, establish and operate 

new branches: (1) Within the limits of the 

city, town or village in which said association is situated, if such establishments and 

operation are at the time expressly authorized 

to State'banks by the law of the State in 

2) at any point within the 

said association is situated, 

if such establishment and operation are at 

the time authorized to State banks by the 

statute law of the State in question by 

language specifically granting such authority 

affirmatively and not merely by implication 

or recognition, and subject to the restrictlons as to location imposed by the law of 

the State on State banks. . . 

II .(f) The term 'branch' as used in 

this section shall be held to include any 

branch bank, branch office, branch agency, 

additional office, or any branch place of 

business located in any State or Territory 

of the United States or in the District of 

Columbia at which deposits are received, or 

checks paid, or money lent." 

plied). 

(Rnphasis supThis language codifies the Court's decision in First National 

Hank in St. Louis v. State of Missouri, supra. -examination 

of the leeislative historv of 12 USC 3-1s indicates that 

the purpose of the statutk was to preserve to the states their 

right to prohibit national banking within their boundaries from 

engaging in any degree of branch banking. (See the remarks 

of Congressman Lute in the Debates of Congress, 77 Congressional 

Record, 5895). We are not unaware of the contrary language 

in two Michigan cases, (Rushton v. Michigan National Hank 
- . 

Hon. J. M, Falkner, page 4 (WW-412) 

298 Mich. 417, 299 N.W. 129 Mich. Sup. 1941); Millard v. First 

National Bank of Detroit, 33 Mich. 610, 61 N.W.2d 804 (Mich. 

Sup. 1953)). In neither was review sought by the Supreme Court 

of the United States. At the time of Rushton v. Michigan National Bank, supra, the state statute authorized branch banks 

in certain. instances. There was, therefore, the requisite 

state statutory authorization set forth in 12 USC 36. At the 

time of Millard v. First National Bank of Detroit, supra, the 

state statute did not apply to national banks Cases are 

therefore distinguishable. There is nothing in the legal authorities nor in the legislative history of the enactment of 

12 USC 36 to indicate that Congress meant to limit In any way 

the decision of First National-Hank in St. Louis v. State ofMissouri, supra. Accordingly, it is our opinion that the state 

does have authority to prohibit national banks from engaging 

in branch banking. 

The proponents of these branch facilities have submltted lengthy briefs which we have carefully considered. 

They contend that the state statute does not apply on the 

grounds that the facilities in question are being maintained 

as depositories of public money and as fiscal and financial 

agents of the United States government pursuant to 12 USC 90, 

and pursuant to an opinion of the Honorable Tom Clark when 

he was Attorney General of the United States with which you 

are familiar. (Opinion dated January 20, 1948, directed to 

the Secretary of Treasury and Secretary of the Army). A 

careful scrutiny of this opinion will show at the outset 

that it does not authorize the cashing of checks or receipt 

of deposits on behalf of military personnel and civilian - 

employees in their own individual capacities, although it 

does authorize the maintenance of some of the other types of 

services set out above. 

We are aware of the language In the opinion of the 

Federal District Court for the Northern District of Texas in 

United States v. Papworth, 156 Fed. Sup. 842, (November 11, 

m3.f) presently on appeal to the Court of Appeals for the 

Fifth'Circuit to the effect that the branch facilities maintained on Carswell Air Force Base cannot be regulated by the 

State because the facility is designated as a fiscal and financial agent of the United States and a depository of public money. A careful reading of the case will show that the 

language alluded to was clearly unnecessary to the holding of 

the case and is therefore dictum. Furthermore, the question 

of whether or not the bank, in cashing checks and receiving 

deposits for military and civilian personnel acting in thelr 

own individual capacity, was acting within the scope of its 
Hon. J. M. Falkner, page 5 (WW-412) 

agency or authority as depository of the United States or as 

a fiscal or financial agent of the United States, was not in 

language or legislative hisapplicable federal statute, 

indicates that the cashing 

for Individuals falls withissue. 

There Is nothing in the 

tory'of 12 USC 90 or of any~other 

or in the legal authorities, that 

of checks and receipt of deposits 

in the scope of authority of a national bank acting as a fiscal or financial agent of the united States. Historically, 

the activities of a fiscal and financial agent have been 

limited to transactions which are for the monetary and fiscal benefit of the United States, such as the purchase of 

gold or silver, the redemption of specie, and the funding of 

loans for the United States. Clearly, the activities of national banks in cashing checks and receiving deposits for 

individuals does not create such a monetary or fiscal benefit for the United States government. Obviously, in conducting such activities, the banks are not acting as depositories 

of public money, Furthermore, in conducting such transactions 

the banks are not acting on behalf of the United States in the 

sense that an agent acts on behalf of his principal for these 

transactions are for the direct benefit of the individuals concerned. Thus, the cashing of checks and receiving of deposits 

by military and civilian per,sonnel in their individual capacities cannot be said to fall within the scope of any agency 

or function that national banks are bound to perform pursuant 

to 12 USC 90 or any other statute using similar verbiage. 

Even if the transactions In question did fall within the scope of such an agency, your attention is directed to 

the fact that the present language of 12 USC 36 was enacted 

in 1927, subsequent to enactment of 12 USC 90. It was therefore a limitation upon the methods and means national banks 

could employ in performing the functions authorized or required by law. It prohibits these functions from being carried out by the means of, "branches" as that term is defined 

in 12 USC 36. Therefore, by no reasonable construction can 

12 USC 90 be said to override the provisions of 12 USC 36 

which preserves to the states their historic right to prohibit the activities described in accordance with the holding 

of First National Hank in St. Louis v. State of Missouri, supra. 

SUMMARY 

The maintenance by national banks which 

have their main banking houses located in the 

State of Texas of additional and separate of- 
Hon. J. M. Falkner, page 6 (WW-412) 

fices on military reservations and at Veterans 

Administration hospitals, at which checks are 

cashed and deposits received on behalf of military personnel or civilian employees in their 

individual capacities, is illegal by virtue of 

Article 3, Chapter IX of the Texas Banking Code, 

as amended. 

Very truly yours, 

WILL WILSON 

Attorney General of Texas 

+ : CA, ., &./‘f ).., i _^,,,. < 

Wallace P. Finfrock 

Assistant 

WPF:nh 

APPROVED: 

OPINION COMMITTEE: 

Geo. P. BUickburn Chairman 

C. K. Richards 

Houghton Brownlee, Jr. 

Lawrence Jones 

REVIEWED FOR THE ATTORNEY GENERAL 

BY: W. V. Geppert