Court Opinion

ID: 4133877
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:43:11.629403+00
Date Added: 2024-06-11T14:34:16.929332
License: Public Domain

IEEE ,\TTORNEY             GENERAL
                         OF-XAS

Honorable Bruce Gibson              Opinion No.M-791
Commissioner
Credit Union Department             Re:   May a credit union
900 Congress Avenue, Suite D              created under Article
Austin, Texas   78701                     2461-l,et seq., v.c.s.,
                                          own a subsidiary cor-
                                          poration whose business
                                          purposes are unrelated
                                          to those of credit
Dear Mr. Gibson:                          unions?
          In your letter asking this office for an opinion, you
ask two questions:
          "1.    Under the provisions of Article 2461,
                 V.C.S. may a credit union own a sub-
                 sidiary corporation under its corporate
                 powers as set out under Section 5, or
                 through its investment powers as set
                 out under Section 241
          "2 .   If the answer to the above Is in the
                 affirmative, may a wholly-owned sub-
                 sidiary corporation distribute its
                 profits annually to members of the
                 credit union."
          It Is our opinion that your first question must be
answered in the negative, and that therefore your question 2
needs no answer.
          Credit unions must be organized under the provisions of
the 1969 Statute codified as Article 2461-l through Article 2461-
49, Vernon's Civil Statutes of Texas, (Acts of the 61st Legisla-
ture, 1969, chapter 186, page 540). Article 2461-1, supra,

                               -3845-
Honorable Bruke Gibson, p'age2   (M-791)

          By~the provisions of the law, loans can be'made only
to "members" and the Board of Qirectors must I'...invest funds
as provided in this Act; ..." Art. 2461~5(10). We find no
mention in any of these statutes of investments unrelated to
the business df lending money or any powers given which are un-
related to the primary purpose of providing credit in the form
of loans to its members at fair and reasonable interest rates.
While the statutes provides a comprehensive plan for creating
and operating credit unions, and while they touch on such things
as membership and expulsion of members, this law is primarily
concerned with monetary matters connect,edwith the business of
lending and borrowing money. In Article 2461-15(d), for example,
we find that any loan security in the form of real estate liens
cannot be "residential" real estate, nor can a loan exceed 6~$
of the appraised value of the land.
          Article 2461-24, allowing investment of credit union
funds, reads as follows:
          "Funds not used in loans to members may be
          invested:

          (1)   in capital shares, obligations, or pre-
                ferred stock issues of any agency or
                association organized either as a stock
                company, mutual association or member-

                in obligations of the State of Texas or
                any subdivision thereof;

                in securities, obligations, participa-
                tions, or other instruments of or issued
                by, or fully guaranteed as to principal
                and interest by, the United States govern-
                ment or any agency thereof; or any trust
                or trusts established for Investing di-
                rectly or collectively In the same;

                              -3846-
Honorable Bruce Gibson, page 3   (M-791)

          (4) in loans,to other credit unions in an
               amount not to exceed 25% of the shares,
               deposits, and surplus of the lending
               credit union, or any trust or trust
               established for lending directly or
               collectively to credit unions;

          (5) in purchases from any liquidating
               credit union in accordance with rules
               and regulations prescribed by the
               Credit Union Commissioner, notes made
               by individual members of the liquidat-
               ing credit union at such~prices as may
               be agreed upon by the board of direc-
               tors of the liquidating credit union
               and the board of directors of the
               purchasing credit union, but no pur-
               chase may be made under authority of
               this paragraph if, upon the making of
               that purchase, the aggregate of the
               unpaid balances of notes purchased
               under authority of this paragraph would
               exceed five percent of the shares, de-
               posits, and surplus of the credit~union;

         (6)   in an aggregate amount not,exceeding
               two and one-half percent of the credit
               union's total assets or the amount of,
               its reserve fund. whichever is lesser.

         (7) in certificates or passbook-type ac-
               counts, insured b the Federal Savings
               andan    Insurancz Corporation, which
               are issued ~by a building and loan
               association or a savings and loan asso-
               ciation domiciled in the United States
               of America;

                              -3847-
Honorable Bruce Gibson, page 4         (M-791)

          (8)   i n certificates of deposit issued by
                a state or national bank domiciled in
                the State of Texas, provided, however,
                no credit union may purchase, or own
                at any one time, certificates of de-
                posit totaling in excess of ten (10)
                percent of the paid-in capital and
                surplus of such issuing bank." (Em-
                phasis added)
          If there is any basis in the credit union statutes for
allowing a credit union to engage in unrelated businesses or
activities, or to invest in them, the authorit would have to
be drawn from Subsection (1) of Article 2461-2 $ . Subsections
(2) through (8), inclusive, of this Article only allow invest-
ments in secured obligations, much,in the fashion of other
closely regulated statutory investments allowed by law as to any
fiduciary of trustee. These are listed as obligations of the
State of Texas, obligations of the United States government,
loans to other credit unions, liquidation of other credit unions,
Federally insured passbook-type accounts, and certificates of
deposit issued by a state or national bank. Investment in such
secured ventures are considered by the Legislature as safe and
not speculative investments where the loss could impair the
stability of the credit union. It is apparent that the statutes
as to credit unions, when considered as a whole, provide only
for secured investment transactions, and that speculative lnvest-
ments are not authorized by law; the statutes as a whole are
looked to for the le islative intent. Popham v. Patterson, 121
Tex. 615, 51 S.W.2d it80 (1932). The rule of ejusdem generis
applies to a construction of Article 2461-24 and therefore sub-
section (1) of this Article could only authorize investment of
a credit union's funds in sustaining and bolstering other credit
unions so as to provide reasonable loans to its members. Sub-
section (6) of this Article 2461-24 makes this clear by declaring
that the subsection (1) description relates to those which are
designed I'. . . to assist in establishing and maintaining liquidity,
solvency, and security in credit union operations; . . ." Farm-
ers' and Mechanics' National Bank v. Hanks, 104 Tex. 320, 137
S.W. l>pital                                      Southwest Corpora-
=,    441 S.W.2d 247, (Tex. C-9,             error ref. n.r.e.,
app. dism. - U.S. - 90 S. Ct. 1120).

                              -3848-
Honorable Bruce Gibson, page 5         (M-791)

                        SUMMARY
               A credit union organized under the pro-
          visions of Acts of the 61st Legislature,
          1969, chapter 186, page 540, (Articles 2461-
          1 through 2461-49, V.C.S.) may not invest
          in or own a subsidiary corporation which is
          unrelated to the purposes of a credit union
          as described in the organic statutes relating
          thereto.
                               Yours very truly,

                             f$zk.;$.&Jhz
                             '~~-'Attor
                                      y General of Texas

Prepared by John H. Banks
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Jim Swearingen
Roger Tyler
Houghton Brownlee
Ivan Williams

MEXDE F. GRIFFIN
Staff Legal Assistant
ALFRED WALKER
Executive Assistant
NOLA WRITE
First Assistant

                              -3849-