. 1

TEEAITORNEY GENERAL

OF-TEXAS

GELRALDC.MANN Au~T~N~I.'~~xAR XIXXX ATTORNKY G*:SERAIHonorable George H. Sheppard Comptroller of Public Accounts Austin, Texas Dear Sir: i;i.nion No. O-3526 : meaning of the term "book value" in Article 88la-53, V. A. C. S. This is in reply to your inquiryas to how the term %ook value" inArticle 881a-53,Vernon's Annotated Revised Civil Statutes of Texas, should be construed in the rendering of property, and the fixing of tax values thereon, of building and loan associations. Said Article 88la-53 is a part of a comprehensiveact dealing with building and loan associations,and said article reads as follows: "Every building and loan association doing business in this state shall, in the city or town in which it is located to the tax assossor at the time fixed by law and in the following manner: (a)The value or its office furniture and fixtures therein; (b) the value of all real estate in such city to which such associationholds title; (c) the value of its assets therein in excess of an amount representing the total of (1)accounts payable and notes payable owing by such association; (2) the book value of the sharesoutstandingand (3) the assessedvalue of thefurniture and fixtures and real estate held by such association and rendered by it for taxation."
An examination of the dictionariesand the cases involving the term "book value" shows that it has a well understoodmeaning. Webster's New InternationalDictionary, 2nd Ed. Unabridged, gives a definition of "bookvalue" as follows: "The value of anything as shownby the books of account of the business owning it; spedif., ofstock, the value as indicatedby the excess of assets over liabilities."Hon. Geo. H. Sheppard, Page 2 O-3526

In 11 Corpus Juris Secundum 521 it defines *bookvalue" as follows: "

...thevalue ascertainedby deductingfrom the assets, carried on the books, the liabilitiesand other matters required to be deducted; thevalue as it appears from the books; the value as predicted on the market value of the assets of the company afterdeducting its liabilities,the value shownby the audit of the business of the companyup to a date specified; and specifically in determining the value of a share of stock upon withdrawal froman association, it has been defined as meaning the proportionate amount of the net assets, the corporation, includingprofits or losses, of

applied to a share of its stock...."
In the case of Lane v. Barnard, (N.Y. Sup. CT.) 173N. Y. S. 714, the court said: "

...Thebook value ofstock ordinarilymeans thevalue thereof as shownby the assets and liabilitiesas carried on the books of the company,...n In the case of Gurley v. %oodbuty, the court said: 177 N, 0. 70, 97 S.E. 754,

"The meaning of "book value of stock" is well understood and its ascertainedby deductingfrom the assets, carried on the books the liabilitiesand other matters required to be deducted fPeoplev, Cabble v. Coleman, 107 N.Y. 541, 14 N.E. 431;

Gabble, 111 App. Div. 426, 97 N.Y. Supp. 773...", In the case of Elhard v. Rott, 36 N.D. 221, 162 N.sf.302, the court said: "

...Itmeans value as predicated on the face value of the assets of the corporationafter deducting its liabilities. Steeg v. Leopold Bldg. & Imp. Co., 126 La. 101, 52 South, 232-235; CabSle **V.** Cabble, 111 App. Div. 426, 97 N. Y. Supp. 773-775; 1 idords and Pharses (SecondSeries) 479. The assets, of course,must appear upon the books of the company,and must be able to be estimated therefore,but it does not follow that thecomputation must have been made on such books and appear on the ledger. The book value of stock is determinedby the face value of the assets as they appear upon the books..."
In the case of People v. Coleman, 107 N. Y. 541, 14 N. ii. 431, the court said: "One mode of arriving at the actual value of the capital stoc!c of a corporation is to takewhat is sometimescalled the "book valuen,which is reachedby estimatingall theHon. Geo. H. Sheppard, Page 3 O-3526

assets as they appear upon the corporatebooks, and deducting all the liabilitiesand other matters required to be deducted by law, and taking thebalance as ths measure of value for assessment. This seems tobe a proper method for arriving at the value of the capitaL stock in the case of a corporationwhich is about to discontinuebusiness,wind up its affairs, holders;...s and distributo its assets among its shareThe cases cited and quoted from above involved ordinary corporations, and not building and loan associations,but we see no reason why the same definitions of "book value"would not apply to building and loan associations. Said organizationsare defined in Article 8dla-1,Vernon's Annotated Revised Civil Statutes of Texas, as follows:
"A buildinS and loan association, as contemplatedby this $7" iArts. 88la-1 to 8&a-68; P. CT Arts. 1136a-1 to 1136a1s any dssociation or corporationheretofore or hereafter formed created or organizedwhich is charteredunder any building'and loan lack, and/or is principally in the business of assistins its members to buy, improve or build homes, or to remove the inculmbrances therefrom, and .which accumulates the funds thus loaned through t!leissuance or sale of its ovensh,res.ff tie have found one case construin;; the term "book value"with reference to building, and lo:n associationstock,and that ,isthe case of Thirteenth ?fard%ilding & Loan Associationv. Ljeissberg, 115 N. J. %qo 467, 170 Atl. 662, 98 A. L. R. 134, in which the court said: "Thewithdrasial

value shouldnot be confused iriththe "book value", The 'Wthdr~~~alvalue" is the :imount ictu~~lly

paid, in addition to such proportion of the profits, or such rate of interest,as may he Prescribedby statute or by the bylavfs. The f*book

value" is the ;~roportionate amount of the net assets, includingprofits or losses, of the association, applied to a share of its stock, t&king into consideration the amount rictually paid in, and the length of time the associationhas had the use of the ;aoney...* There are no Texas a?pell:lte court cases, as far as :iecan find, approvinga definition-1 of the term "bookvalue." The term is mentioned in the cnse of iiineinzer v. Day, (Tex. Civ. App.) 58 S. >i;.

(2d) S76, but no definition is adopted by the a;?pellate court. Ye see no reason why the Texas courts should not be governed by the SLi;te weli ~;nt,,

--stoodmeaning of the term "book value" th;:Lt

the courts of other states have alnost unanimously adopted... -

Hon. Geo. II.Sheppard, Page 4 O-3526

Our ans;qerto your inquiry is that the term "bookvalue* in Article Ma-53, V. A. C. S., means the value of the shares outstandingas shown by tho assetsand liabilitiesas carried on the books of the buildingand loan association.

APPROVEU JIJNi3



### 7, 1941 Yours very truly

ATTUWEY GENERAL OF TEXAS FIHST ASSISTANT BY ATTOWJiY GENERAL Cecil C. Xotsch Assistant