Untitled Texas Attorney General Opinion ( 1967 )

E L~YYJXBRNEY GENERAL OFI'EXAS Honorable J. M. Falkner Opinion No.`` M-02 Commissioner, Department of Banking Re: Whether the Sharpstown State Austin, Texas Bank of Houston has the authority to purchase property, identified Dear Mr. Falkner: on submitted map as Building "F". In your letter to this office you have requested the opinion of the Attorney General as to whether the Sharpstown State Bank may, under the laws of Texas, purchase a building designated as Building "F" in the Sharpstown Shopping Center, Houston, Harris County, Texas. Building 'IF",as shown on the submitted map, consists of one single integrated structure, a portion of which is ten (10) stories high and a portion of which is two (2) stories high. Under the facts submitted, the Sharpstown State Bank presently leases a portion of the ten (10) story part of the said building for space in which to conduct its banking operations, other sections of the ten (10) story portion being rented to commercial tenants. Furthermore, the two (2) story portion of the structure is also currently rented to commercial tenants. Article 342-501, Vernon's Civil Statutes, provides, in part, that: "NO state bank shall, without prior written consent of the Banking Commissioner, invest an amount in excess of fifty per cent (5C$) of its capital and certified surplus in a domicile (including land and building) nor an amount in excess of fifteen per cent (15%) of its capital and certified surplus in its furniture and fixtures. o 0" From the facts submitted, 'this statute is not relevant, in that the Sharpstown State Bank would increase its capital and certified surplus in an amount equal to the cost of the new building, should such purchase be.deemed lawful. We next turn to Article 342-502, Vernon's Civil Statutes, which provides, in part, that: - 365 - Honorable 3. M. Falkner, page 2 (M-82) "No state bank shall acauire real estate. other than its domicile, except in satis- factionor partial sat,isfactionof in- ,debtedness,-OF in the ordinary course of the collection of loans and other obli- gations owing the bank, or for the use of the bank and future expansion of its banking house i o 0" (Emphasis Suppiled) In this regard, Judge Speer, i,nLaw of Banks and Banking in Texas (1952), Section 102, characterizes the use of the bank building as follows: "Under the provisions of Article 3 of Chapter IX of the Banking Code it is the author's thought that some consideration should be given to the phrase in its own banking hou.se. "While the Constitution and Code have taken meticulous care in osder to prevent branch banking, and to confine the activities of banks t,oiheir own place of business and bank building, no a,ttempthas been made to define the character of the building. "Obviously the bank may acquire and,own a building of such architec%ural arrangement, and structural features,,and of such proportions and spaces as %he board in its sound business discretion thinks advantageous, and appropriate- within the limitations of the investment PPO- visions. It is not required that the building be not beyond the bankks actual floor space requirements - present or prospective. Sound business discretion might and often does call for rental space and building conveniences beyond present requirements. 'The true test would seem ~tobe ,thatso iong as there is archi%.ecturaland substantial stru~cturalconnection there is one banking house, and the various activit,iesof the bank may be carried on in any roomy,or space what- soever as the board may authorize, Wheth.er such structure crosses 10% lines, or tunnels under, or spans over alley or street can make no difference. The building includes all of its parts.1 - 366- I . Honorable J. M. Falkner, page 3 (M- 82) 'A comparatively recent opinion of the Attorney General supports the text where a garage for parking and deposit windows, situated on a lot across the street fr m the main building is connected by tunnel.E!!! 1. Op. Atty. General No. O-2691. "If the property is being purchased by the bank for the good faith purpose of a banking house, the law is not concerned with the character of the build- ing, its structural peculiarities, the number of stories, the number of separate rooms or offices, and the like; these are matters for the sound business discretion of the Board of Directors. It would be difficult to find a building which had not been built to specifications for a bank, that would in all respects be ex- actly fitted to the demands of a bank purchasing the same. Indeed it might (be difficult to construct a building to specifications suited not only to the present needs but to the future needs of a bank undertaking to construct its own banking house. In the present case the surplus room, stories, offices and the like, it appears, may be profitably rented by the bank. We cannot close our eyes to the fact that in many instances - perhaps in most in- stances - our better banks occupy their own buildings consisting of several, sometimes many stories, and much, if not most of the floor space is not actually used by the bank in conducting its banking business but is rented out. There can be no valid objection to this if the major good faith purpose of the acquisition or con- struction of the building be to provide a banking house for the institution.' 2. Op. Atty. General No. v-1046. "The contemplated new structure, although to be erected across the street from the original 'banking house', will be physically joined thereto by a tunnel under the street, which you state will be suitable for passage back and forth. It is evident that besides being joined physically, the new structure, including the passageway, will be in close proximity to the present building. It will be used in connection with the original building and as a unit will be de- voted to one general common purpose. It is our opinion that the two structures will in reality be one and when used in the manner proposed will constitute the bank's 'banking house'. To hold that said Article requires deposits to be made in abank's original building, and not in an addition thereto would sacrifice the real spirit of the law to pure literalism." - 367- . I Honorable J. M. Falkner, page 4 (M- 82) Under the facts submitted, the entire building is tied together as a unit with all~utilities, including gas, water, and electricity and air conditioning, being built into the entire structure which was constructed at the same time. The legislative history of Article 342-501, shows that the Legislature did not intend by the word "domicile" to limit the premises which could be owned by a state,bank merely to those premises which'the bank itself occupies for quarters. Prior to 1925, Article 5l2,,Revised Civil Statutes, prohibited state banks from investing more than fifty percent (50s) of their capital or surplus in a "banking house". Acts 1923, page 322. In 1925, wording of the Article was changed from "banking house". to "domicile". This change clearly showed that the Legislature contemplated that the domicile of the bank could include an area greater than that required to house the banking facilities . themselves. From the foregoing it may be clearly seen that Article 342-501 permits the.acqulsition by a bank of a domicile, but does not in any way attempt to limit the size of such structure to a building consisting solely of banking facilities. As point- ed out In Attorney General's Opinion O-2691: 11 0 .In many instances - perhaps in most instances - our better banks occupy their own buildings consisting of several, some- times many stories, and much, if not most of the floor space is not actually used by the bank In conducting its banking business but is rented out 0 1 0" There is no vertical limitation to a banking domicile. It would therefore be completely illogical to ho.ldthat a bank may acquire, as its domicile, excess vertical space but not acquire excess lateral space, A prohibitionagainst the acquisition of the one would of a necessity extend to a prohibition of the ac- quiring of the other, Therefore, it is the opinion of this office that the Sharps- town State Bank will be within legal limitatiorsin purchasing the property identified on the submitted map as Building 'IF"in the Sharpstown Center3 Houston, Harris County, Texas, This opinion is necessarily limited to the factual situation presented to this office. - 368- Honorable J. M. Falkner, page 5 (M-62) SUMMARY -c---m- The Sharpstown State Bank will be within legal limitations inpurchasing the pro- perty identified as Building "F" in the Sharpstown Center, Houston, Harris County, Texas. C. MARTIN ey General of Texas CCM:lh Prepared by Charles M. Bardwsll Assistant Attorney General APPROVED: OPINION COMMITTEE Hawthorne Phillips, Chairman W. V. Geppert, Co-Chairman Ralph Rash Jack Sparks W. 0. Shultz Houghton Brownlee STAFF LEGAL ASSISTANT A. J. Carubbl, Jr.