Honorable J. M. Falkper No. c- '.4aa Banking CommlsEiionerof Texas Austin, Texas ., Re: Under the given factual situation and the provisions of the Texas Trust Act, la the bank ~ln quektlon, as trustee, prohibited from depositing the '. !%Zc~e%~oslts lq its.de inatl- .iiatution for a period .of more~than.one y.earand 'related Deay Mr. Balkner:. ~questions. i 'You hav&~reQueated.our opinlon:on certain,Quesflons undetithe following relevant . facts: '!A6 &at& chartered.bank and trust.company has b.&nrx=&d:truatee tinderVarlou~;tri~stinden; 'tureswhich auttibx$zethe .bw-In its-.flduciary capacity,'irrespectlve~of any proviklon..or pakt bf'thk.%.xasTrust Act,..to'lnveat $r'shares of a savings- and loan tisociatlon located in ,the .s&nti zl$y and deposit money'fn the trustee bank. The trustee Is &so given the right and ~1s requested to depdslt the income ftim the trust estates in the savlngs~and.loah asso&atlons'to earn the .curxent rate of Interest, "The tkstee~bank 'has deposllzedkth it&f on time c.ertiflcatea.ofdeposit.$37.500 which has been so deposited'for bn6 year. Trus'tee bank has alko deposited with a sayings and loan 'aasoc+atlonvarious savings accounts which form part of the trust'--eetates,under sbeclflc author- ization in the various trust -dentures ltitie,spect$ve PC any provlafon of the Texas Trust-Act. . . .
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Honorable J.'M. Falkner, Page 2 ,(C-488)
"The bank's directors own 85.4$ of the outstand- ing stock in the bank. The savings and loqn dlrec- tors own 97% of the outstanding stock In the savings and loan association. Mrectors of both the bank and the savings and loan association own 82.3% of the bank stock.and 77.6% of~the savings and loan stock." Under the foregoing facts you have.reqtieatedour opinion to the following questions: Is the trustee bank prohibited f'rom depositing the $& 500 In time certificate deposits In Its own ln- stltutl& for a.perlod of more than'one year? .2,. Is the.trus$ke bank prohibited from.maklng deposits In savings accounts ln.$he savings and loan of trust f'inxia assbclat$@ 3. If queatloti'number2 ls.anawered,ln,$he affirma-. tlve, then Uthe savings and loan asaociat~o~l~c~eaa~s its permanent reserve stock by selling shares-of additional stock, would.the trustee bank be prohibited from +ve%tlng tiuat funds In such'atock of the savings and loan asaocla- lqion? .Ir-some legal relatlonahlps, the.fiduclaryelement Is 'inore Intense than In others. It la pecullar.ly,lntense in the caae'of a trust. While this fiduclary~relatlonahlp creates zinumber of duties, none Is more fundamental than the duty owed by the trustee .to the beneficiaries In the nature of the dtityof loyalty. This duty Is.sometimes characterized as.not permlttlng a trustee'to place hlm- self fi'a position where,lt would be Sor-his own benefit to violate his duties to the beneficiaries. This duty 6f 'lojralty Is based on'a .generalprincipal ~of'pollby and morality which forblds~a fi'duclaryfrom placing himself' In a sltuatiotiwhere there is or could be 'confll.ct'b+ween his self-interest and his duty to others. See Scott on Trust, 8 170, Duty of $,yalty, et seq.. A number of .states.haveexpr&asly enacted statutes that set out the duty of loyalty.ln-clear and unambiguous terms. In Tegas; any dev$atlon.from this hi loyalty Is exprkssly prohibited by Article 7 which provides:
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Honorable J. Mi Falkner, Page-3 (C- 488)
II . but no act of the trustor shall relieve