THE A7rro ET GENERAL 

OF EXAS 

October 20, 1989 

Mr. James L. Pledger 

Commissioner 

Texas Savings and Loan 

Department 

2601 N. Lamar, Suite 201 

Austin, Texas 78705 

Opinion No. JM-1110 

Re: Whether article 342-705, 

V.T.C.S., restricts the authority of the Savings and Loan 

Commissioner to issue subpoenas for bank records 

(RQ-1765) 

Dear Mr. Pledger: 

You ask: 

Does Section 1 of Article 342-705, Vernon's 

Texas Civil Statutes, restrict the authority 

of the Texas Savings and Loan Commissioner to 

issue subpoenas to banks for records of bank 

accounts or other bank records pursuant to 

examinations conducted under Section 8.02 of 

the Texas Savings and Loan Act? 

Section 8.02 of article 852a, V.T.C.S., a provision of 

the Savings and Loan Act (hereinafter "section 8.02") 

provides in pertinent part: 

The commissioner shall periodically cause 

an examination to be made into the affairs of 

each association, including its subsidiaries 

and transactions and the dealings of any 

savings and loan holding company related to 

its savings and loan subsidiaries, including 

an audit if an independent audit is not 

available or is unsatisfactory to the commissioner. On completion of an audit, one copy 

of the audit report, signed and certified by 

the auditor, shall be filed promptly with the 

commissioner. The commissioner, a deputy 

commissioner, or an examiner or auditor of 

the commissioner shall have free access to 

the books and records of an association or a 

subsidiary corporation or holding company of 

the association that relate to the association's business and to books and records kept 

P. 5815 
Mr. James L. Pledger - Page 2 (JM-1110) 

by an officer, agent, or employee of one of 

the entities relating to or on which a record 

of its business is kept. The commissioner, 

deputy commissioner, examiner, or auditor may 

subpoena witnesses and administer oaths or 

affirmations in examination of the directors, 

officers, agents, or employees of an association or any other person in relation to its 

affairs, transactions, and condition and may 

require and compel by subpoena the production 

of records, books, papers, contracts, or 

other documents. 

It is our understanding that it has been a frequent and 

long-standing practice of the Savings and Loan Department 

(hereinafter the "department") of the Finance Commission of 

Texas, in conducting the examinations provided for in 

section 8.02, to obtain bank records where necessary to 

reconstruct transactions of a savings and loan association 

(hereinafter "S&L") under examination. In the brief 

submitted with your request, you refer, as authority for 

this practice, to the language of section 8.02 empowering 

the commissioner, etc., to "subpoena witnesses and 

administer oaths or affirmations in examination of the 

directors, officers, agents, or employees of an association 

or anv other oerson in relation to its affairs, transactions, and condition and may require and compel by subpoena 

the production of records, books, papers, contracts, or 

other documents." (Emphasis yours.)1 

1. The last quoted language of section 8.02 derives 

from provisions originally enacted in 1913 as part of, in 

the words of the bill's caption, "an Act to provide for the 

incorporation and regulation of certain corporations 

generally known as building and loan associations." Acts 

1913, 33d Leg., 1st C.S., ch. 33, at 72. Section 16 of the 

1913 act provided for periodic examination of the affairs of 

all building and loan associations by the Commissioner of 

Banking and Insurance. The second sentence of section 16 

read: 

Such examinations shall be full and complete, and in 

making the same the examiner shall have full access 

to, and may compel the production of all books, papers 

and moneys, etc., of the association under examination, and may administer oaths to and examine the 

officers of such association or any other person 

(Footnote Continued) 

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Mr. James L. Pledger - Page 3 (JM-1110) 

We note that you do not ask whether this language 

of section 8.02 standing alone authorizes the commissioner 

to subpoena bank records in connection with the examination 

of an S&L. In the understanding that the department has 

long construed the provision to grant such authority -- and 

mindful of the rule that a court will ordinarily defer to a 

long-standing construction of an ambiguous statute by the 

administrative agency charged with its implementation -- we 

will assume for purposes of this opinion that section 8.02 

does authorize the commissioner to subpoena bank records 

when he deems them pertinent to the affairs of an S&L under 

examination. See, e.a., Ex carte Roloff, 510 S.W.2d 913 

(Tex. 1974). 

It is our understanding that in a recent examination of 

an S&L under section 8.02, the department sought to examine 

certain bank records the commissioner deemed relevant to the 

affairs of the S&L under examination. The bank's officials 

expressed concern that a provision of the Texas Banking Code 

of 1943, as amended, see V.T.C.S. art. 342-705, restricted 

the bank's disclosure of records covered by that article. 

Article 342-705, as amended by the 71st Legislature in 

1989, provides in section 1 that no financial institution2 

shall be required to recognize the claim of any third party 

to any deposit or withhold payment of any deposit to any 

depositor until the bank is served with citation or other 

process from a court. Section 1 as amended further 

provides: 

[Nleither shall any~financial institution be 

required to disclose or produce to third 

(Footnote Continued) 

connected therewith, as to its business and affairs. 

Id. at 76. 

2. Section 4 of article 342-705, added in 1989 provides: 

In this article 'financial institution' means a 

state or national bank or state or federal savings and 

loan association maintaining an office, branch, or 

agency office in this state or otherwise engaged in 

the business of lending money or extending credit in 

this state. 

Acts 1989, 71st Leg., ch. 1196, 5 7, at 4886. 

p. 5817 
Mr. .James L. Pledger - Page 4 (JM-1110) 

parties, or permit third parties to examine 

the amount deposited by any depositor or 

other records pertaining to the deposits, 

accounts, loans, or other transactions of 

a depositor, owner, borrower, or customer 

except (i) where the depositor, owner, 

borrower, or customer to whom the information 

is to be disclosed is a proper or necessary 

party to a proceeding in a court of competent 

jurisdiction in which event the records 

pertaining to the deposits, accounts, loans, 

or other financial institution transactions 

of such depositor, owner, borrower, or 

customer shall be subject to disclosure or 

(ii) where the financial institution itself 

is a proper or necessary party to a proceeding in a court of competent jurisdiction, 

except that records pertaining to the 

deposits, accounts, loans, or other transactions of a depositor, owner, borrower, or 

customer may not be disclosed unless the 

court orders and the financial institution 

subsequently obtains the written consent of 

the depositor, owner, borrower, or customer 

to whom the records pertain, or (iii) in 

response to a subpoena issued by a legislative investigating committee of the Legislature of Texas, or (iv) in response to a 

request for examination of its records by the 

Attorney General of Texas pursuant to Article 

1302-5.01 et seq. of the Texas Miscellaneous 

Corporation Laws Act. 

Acts 1989, 71st Leg., ch. 1196, 5 7, at 4885, effective June 

16, 1989. 

Attorney General Opinion JM-101 (1983), at 2, pointed 

to the provision in section 3 of a 1983 amendment to article 

342-705 that "the provisions of this Act shall not apply to 

the investigation or prosecution of criminal offenses." YOU 

state in your brief, and we assume for purposes of this 

opinion, that the bank records you ask about are not sought 

in the context of criminal investigations or prosecutions. 

The limitations on required disclosure provided for in 

article 342-705 were first adopted in 1963, and then applied 

only to bank depositors' accounts. Acts 1963, 58th Leg., 

P. 5818 
Mr. James L. Pledger - Page 5 (JM-1110) 

ch. 440, § 1, at 1135.3 The 1989 amendment to article 

342-705 broadened the scope of the disclosure restriction to 

cover "records pertaining to the deposits, accounts, loans, 

or other transactions of a depositor, owner, borrower, or 

customer" of a financial institution. Acts 1989, 71st Leg., 

ch. 1196, § 7, at 4885. Clearly, the application of article 

342-705 in its present form as a restriction on the 

examination of S&L's under section 8.02 would limit not only 

the department% access to bank records deemed relevant to 

examinations, but also access to the records of S&L's under 

examination, the latter being "financial institutions" now 

within the article's coverage. 

The 1989 amendment to article 342-705 also added a 

section 5, providing in relevant part: 

This article does not restrict or apply to 

the use or disclosure by a bank of information or records pertaining to deposits, 

accounts, or bank transactions if the use or 

disclosure is made in good faith in the usual 

course of the financial business of the 

bank . . . . 

Id. at 4886. 

3. It is perhaps worthy of note that subparts (iii) 

and (iv) of section 1, excepting legislative committee 

subpoenas and certain requests for examination by the 

attorney general from the required disclosure prohibition, 

derive from a house committee amendment to the 1963 bill 

which originally added the disclosure restrictions to 

article 342-705. The bill as introduced provided only for 

the litigation exceptions covered in subparts (i) and (ii). 

See Bill File, S.B. 298, 58th Leg. (1963). 

We also note that in the enrolled version of the 1989 

amendment to section 1, and in the corresponding session law 

entry -- chapter 1196 -- an "as" appears to have been mistakenly deleted from the pre-amendment language before the 

words "to whom information is to be disclosed" in subpart 

(iI. That language should probably read "except (i) where 

the depositor, owner, borrower, or customer as to whom the 

information is to be disclosed . . .'I Obviously subpart (i) 

is meant to except information s to depositors and not 

information to be disclosed to the depositors, etc., themselves. See Bill File, S.B. 962, 71st Leg. (1989). 

p. 5819 
Mr. James L. Pledger - Page 6 (JM-1110) 

Though we do not here rule on the precise scope of the 

language in section 5, that article 342-705 "does not 

restrict or apply to . . . disclosure . . . [of bank] 

records . . . if the use or disclosure is made in good faith 

in the usual course of the financial business of the bank," 

we think that the language strongly suggests that the 

article is not intended to apply to disclosures in the 

course of section 8.02 examinations. Banks and other 

financial institutions are regulated industries, and it 

would seem that the periodic examinations provided for in 

section 8.02 as part of the regulatory process would be 

matters "in the usual course of the financial business of 

the bank." 

Concededly, if section 5 of article 342-705 is not read 

to except that articles' application to section 8.02 

examinations involving bank records, the provisions of 

section 8.02 and article 342-705 could be harmonized by 

reading the disclosure limitations in article 342-705 as an 

exception to the subpoena provisions of section 8.02; i.e., 

that section 8.02 authorizes the commissioner to gain access 

to records pertinent to examinations of S&L's except those 

records article 342-705 provides a financial institution may 

not be required to disclose. You suggest in your brief that 

to place such restrictions on section 8.02 examinations 

would yield an absurd result by rendering examinations based 

only on records not covered by article 342-705 ineffectual. 

Of course, in attempting to ascertain the legislative intent 

as to the interaction, if any, of section 8.02 and article 

342-705, a court would indulge the presumption that the 

legislature could not have intended an absurd or unreasonable result. See, e.a., Metrooolitan Transit Auth. v. 

Plessner, 682 S.W.2d 650 (Tex. App. - Houston [lst Dist.] 

1984, no writ). 

A determination of whether the result of limiting the 

section 8.02 subpoena power by the disclosure limitations in 

article 342-705 would be an absurd or unreasonable one 

might, we think, involve questions of fact as to examination 

procedures and whether the department's assessments of the 

soundness and lawfulness of an S&L's operations can be made 

without access to such records as are covered by article 

342-705. We are unable to make findings of fact in the 

opinion process. The department, as the agency responsible 

for examining and regulating S&L's, is better situated than 

we are to make such determinations. 

Clearly the purpose of section 8.02 examinations is to 

provide the commissioner with information about the 

financial condition of S&L's so that he may perform his 

other duties under the act. See, e.a., V.T.C.S. arts. 

P. 5820 
Mr. James L. Pledger - Page 7 (JM-1110) 

342-205(d) (commissioner and department to supervise and 

regulate S&L's); 852a, 55 8.01 (department and commissioner 

to regulate S&L's and subsidiaries and enforce Savings and 

Loan Act), 8.04 (commissioner may intervene in the affairs 

of an S&L if it is engaging in unsound practices or violates 

applicable laws or rules), 5.01 (commissioner shall adopt 

rules regarding loans and investments of S&L, including 

types of loans S&L may originate, make, or sell), 5.05 

(restrictions on lending). It may be that in order to 

fulfill his statutory duties to insure that S&L's are 

operating in a sound and lawful manner, etc., the commissioner would have occasion to require information available 

only from the types of records covered by article 342-705. 

Until such time as a court,4 through the taking of 

testimony and other evidence, determines a reasonable 

construction of the provisions in question, or until the 

legislature clarifies their import, we feel we must defer to 

what we understand to be the long-standing construction of 

these provisions by the department: that the disclosure 

restrictions of article 342-705 do not apply to the 

obtaining of records by the Savings and Loan Commissioner in 

the context of section 8.02 examinations of S&L%. The 

newly added provisions of section 5 of article 342-705 would 

appear to 'support the department's long-standing 

construction of that article as not applying to section 8.02 

examinations, at least when the records sought are &+.& 

records within the meaning of that section. 

In support of our decision to adhere to the construction of the provisions in question by the department, we 

note that the Banking Department of the Finance Commission 

has also, as we understand it, long construed the 

restrictions on disclosure in article 342-705 not to apply 

to bank examinations conducted by the Banking Department 

under the similarly broad authorization of V.T.C.S. article 

4. Interestingly, Nikrasch v. State, 698 S.W.2d 443, 

450 (Tex. APP. - Dallas 1985, no writ), noted that the 

language of the prior version of article 342-705 under 

consideration in that opinion -- "neither shall any bank be 

required to disclose the amount deposited by any depositor 

to third parties" -- did not "forbid a bank from disclosing 

how much a depositor has on deposit: it only provides that a 

bank may not be reauired to disclose that information." 

(Emphasis in original.) We find no cases, however, 

addressing whether article 342-705 limits the subpoena of 

bank records under section 8.02. 

p. 5821 
Mr. James L. Pledger - Page 8 (JM-1110) 

342-208 (commissioner, etc., may "examine any person under 

oath upon any subject which he deems pertinent to the 

financial condition of any state or private bank"). 

We also note that section 11.18 of V.T.C.S. article 

852a, the Savings and Loan Act, restricts the commissioner 

and other officers, agents and employees of the savings and 

loan section from disclosing information obtained in 

examinations. The existence of these provisions we think 

suggests that there would be no policy served by applying 

the additional disclosure restrictions of article 342-705 to 

section 8.02 examinations of S&L'S. The provision of 12 

U.S.C., section 3413(b), also indicates that, as a policy 

matter, regulatory agencies should not be subject to 

disclosure restrictions such as these of article 342-705. 

Section 3413(b) excepts examinations by supervisory agencies 

of financial institutions from the restrictions on access to 

financial records by government authorities provided for in 

sections 3401, et seq. 

You also ask: 

Do the advance notice and challenge provisions of Sections 2 and 3 of Article 342-705, 

apply to subpoenas issued to banks by the 

Texas Savings and Loan Commissioner in 

examinations conducted under Section 8.02 of 

the Texas Savings and Loan Act? 

Section 2 of article 342-705 provides that "before 

disclosure, production, or examination may be required under 

Section 1 of this article" the party or entity seeking 

disclosure must give notice and certificate of service as 

provided for in the section. Since, following the Savings 

and Loan Department's construction of the provisions in 

question, we have concluded that the disclosure limitation 

provisions of section 1 of article 342-705 do not apply to 

records sought by the department under section 8.02 of the 

Savings and Loan Act, it would follow that the department's 

obtaining such records would not involve a "disclosure, 

production, or examination . . . required under Section 1" 

within the meaning of the provisions of section 2, and that 

the notice and certification requirements of section 2 would 

therefore not be applicable to subpoenas for records issued 

to banks in connection with S&L examinations under section 

8.02 of the Savings and Loan Act. 

Section 3 of article 342-705 deals with court challenges to production subpoenas, requests, etc. under 

sections 1 and 2. Since, as we have concluded, sections 1 

and 2 of article 342-705 do not apply to subpoenas of bank 

p. 5822 
Mr. James L. Pledger - Page 9 (JM-1110) 

records by the Savings and Loan Department under section 

8.02 of the Savings and Loan Act, the provisions of section 

3 regarding challenges to section 1 and section 2 subpoenas 

would not apply either to such section 8.02 subpoenas by the 

department. 

SUMMARY 

The provisions of V.T.C.S. article 

342-705, restricting disclosure of records of 

a financial institution and providing for 

notice, certificates of service, and court 

challenges with regard to requests and 

subpoenas for such records, do not apply to 

subpoenas for bank records by the Savings and 

Loan Commissioner in connection with examinations of savings and loan associations under 

section 8.02 of article 852a, the Savings and 

Loan Act. 

Very truly y , J & h 

JIM MATTOX 

Attorney General of Texas 

WARY KELLER 

First Assistant Attorney General 

LOU MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by William Walker 

Assistant Attorney General 

p. 5823