Untitled Texas Attorney General Opinion ( 1962 )

Honorable P. Frank Lake Opinion No. WW-1463
Secretary of State
Austin 11, Texas Re: Whether the Secretary of State
should accept and file the appli-
cation of a foreign national bank
for a certificate of authority to
transact business in Texas under
the stated purpose clause.
Dear Mr. Lake:
You have requested the opinion of this office concerning your authority
to accept and file the application of a foreign national bank (the State National
Bank of Texarkana, Arkansas) for a certificate of authority to transact busi-
ness in Texas, for the following purpose or purposes, pursuant to the follow-
ing provisions of Article 1513a, V. C..S. :
“To act as trustee, executor, administrator, or guardian
when designated by any person, corporation, or court to do so,
and as agent for the performance of any lawful act including
the right to receive deposits made by agencies of the United
States of America for the authorized account of any individual. ”
While this precise question has not previously been passed on by this
office, Opinion No. WW-511, dated October 6, 1958, held that the Secretary
of State should not accept and file an application from a foreign state bank for
a certificate of authority to transact business in Texas by qualifyingunder
Article 1513a, because of the following provisions of Article 342-902 of the
Banking Code of 1943:
“It shall be unlawful for any person, corporation, firm,
partnership, association or common law trust:
“(1) To conduct a banking or trust business or to hold
out to the public that it is conducting a banking or trust
business; or
“(2) To use in its name, stationery or advertising, the
term ‘bank, ’ ‘bank and trust, ’ ‘savings bank, ’ ‘certificate of
Honorable P. Frank Lake, page 2 (WW- 1kw)
deposit, ’ ‘trust’ or any other term or word calculated to
deceive the public into the belief that such person, cor-
poration, firm, partnership, association, common law
trust, or other group of persons is engaged in the banking
or trust business.
“Provided, however, that this Article shall not apply to
(1) national banks; (2) state banks; (3) other corporations
heretofore or hereafter organized under the laws of this state
or of the United States to the extent that such corporations
are authorized under their charter or the laws of this state
or of the United States to conduct such business or to use such
term; . . .‘I*
Opinion No. WW-511 further held that Article 1513a operates to over-
ride or repeal by implication those portions of Article 342-902 which would
prohibit foreign companies from doing a trust business in Texas or from using
in its name the word “trust, ” insofar as such foreign corporations are con-
cerned. This holding was based upon the basic purpose of Article 342-902
and its predecessors, which is to prevent the public from being deceived into
believing that the entity involved was authorized by law to perform the activ-
ities indicated by its name.
We emphasize this reasoning by the following quotations from Opinion
No. WW-511:
“We call attention to the language in Section 2 that it is .
unlawful for ,any person, etc. , ‘to use in its name. . . the
term. . . “trust” or any other term or word calculated to
deceive the public into the belief ,that such person (etc. ). . .
is engaged in the. . . trust business. ’ We further call atten-
tion to the language of the emergency clause in Senate Bill
343 of the 1957 Legislature amending 342-902 as follows:
“‘The fact that under existing law the people of this
state are subject to misleading advertising and other
deceitful practices calculated to deceive the public
into the belief that certain unauthorized persons or
*Emphases throughout are supplie,d.
Honorable P. Frank Lake, page 3 (WW-1463)
groups of persons are under the strict supervision of
the State Banking Department, when in fact the protec-
tion afforded by strict supervision does not exist,
creates an emergency. . . ’
“It is apparent that the prohibition against using the name
‘trust’ is directly tied in with and a part of the prohibition against
‘conducting’ or to”hold out.. . that it is conducting’ a trust busi-
ness. The evil legislated against in Section 2 of Article 342-902
was the deception to the public which occurred when a company
used the name ‘trust’ in its title when in fact it was not entitled
to engage in the trust business. That evil will not occur in the
case of a foreign corporation obtaining a permit under the terms
of [Article 1513a] as such a corporation would be authorized to
engage in the trust business and would not be deceiving the pub-
lic byusing the name ‘trust’ in its title. ”
By substituting the word “bank” for ,t’trust” in the mater~ial just quoted, it
becomes obvious that the same reasoning applies to prevent the use of the
word “bank” by a foreign corporation not authorized to engage in the bank-
ing business in Texas. This result and the prohibition against it is succinctly
expressed in the following paragraphs quoted from Opinion No. WW-511:
#I[Article 1513a] should be limited in its overriding effect
to the subject matter above, there being no provision in [Article
1513a] which would allow a foreign corporation to come into the
State and do a banking business. The use of the term ‘bank’ in
the title of such a corporation would be deceptive and would
violate Article 342-902.
“In answer to your first question we hold that a foreign cor-
poration with the name ‘Bank’ in its title may not obtain a permit
to transact business in this State. ”
The applicant considered in this opinion, a foreign national bank, urges
that Opinion No. ,WW-511 does not apply to it because of the exemptions con-
tained in the second paragraph of Section 2 of Article 342-902, quoted above.
We are of the opinion, however, that this contention is without merit for the
reason that the exemptions there listed apply only to national banks and other
corporations organized under the laws of the United States, which are located
within the State of Texas, and do not purport to exempt foreign corporations
Honorable P. Frank Lake, page’4 (WW- 1463)
of this nature from the deceptive practices prohibition contained in Section
2 of Article 342-902. This is apparent from the following provisions of
Articles 342- 101 and 342-908:
“This code provides a complete system of laws govern-
ing the organization, operation, supervision and liquidation
of state banks, and to the extent indicated by the context,
governing private banks and national banks domiciled in this
State;”
“It is not the intention of the Legislature in the enact-
ment of this Code, to discriminate bettieen state banks and
national banks, and, to the extent that the State of Texas has
power to legislate with reference to national banks, each pro-
vision of the Code shall apply alike to state banks and national
banks domiciled in this State. Acts 1943, 48th Leg., p. 165,
ch. 97, subch. IX, art. 8. ‘I
Obviously, the Legislature intended to exempt from the prohibition of Article
342-902 national banks and other corporations organized under the laws of
the United States, domiciled in this State, having the right to exercise the
powers indicated by their names; but, equally obvious is the conclusion that
the Legislature intended to prohibit any corporation from using any word or
any combination of words in its name which would tend to mislead the public
into believing that the corporation was authorized by law to perform acts
which it in fact did not have the power to perform.in Texas.
Such an intent is supported by~opinion R-2076, dated June 8, 1950,
which held that the Secretary of.State was authorized to grant a charter to
the Bank Investment Company, Inc. (organized under Article 1303b), since
the use of such name would not indicate to the public that the corporation was
conducting a banking business. Opinion No. .R-2076 held that Article 342-902
should not be given a literal construction which would lead to absurd results s
and gave the following examples of corporate names which might be in viola-
tion of the law under such a strict construction: Cut Bank Refining Company;
Red Bank Refining Company of Illinois; Bankers Life Assurance Company;
Bankers Life Company; and Dallas’ County Blood Bank. However, Opinion
R-2076 concluded as follows:
“This opinion is not to be construed as holding that a
charter or permit may be granted by the Secretary of,State to
any corporation where the use of any of the forbidden words
-
Honorable P. Frank Lake, page .5 (WW- 1463)
in the corporate name would violate the provisions of Article
342-902 by enabling such corporation to hold itself outs to the
public as being engaged in a banking business. 11
Since there is no provision of law which authorizes a foreign corpor-
ation to come into Texas and do a banking business, we are oft the opinion
that you are prohibited, by the terms of Article 342-902, from accepting
and filing the application of a foreign national bank for a certificate of
authority to transact business in Texas under the purpose clause of Article
1513a.
Although the foregoing is sufficient to require your refusal of the
application, we desire to reply to the applicant’s contention that, having been
granted power to act as trustee, exe,cutor, administrator, guardian of estates
and in other fiduciary capacities under 12 USCA 248(k), it may now come into
Texas and conduct a trust business under Article 1513a. Title 12, USCA,
Section 248(k), reads, in part, as follows:
“The Board,of Governors of the Federal Reserve System
shall be authorized and empowered:
l’(k) To grant by special permit to national banks apply-
ing therefor, when not in contravention of state or local law,
the right to act as trustee, executor, administrator, regis-
trar of stocks and bonds, guardian of estates, assignee, re-
ceiver, committee of estates of lunatics, or in any other
fiduciary capacity in which State banks, trust companies e or
other corporations which come into comoetition with national
banks are-permitted to act under the laws of the State in which
the national bank is located.
“Whenever the laws of such.State authorize or permit the
exercise of any or all of the foregoing powers by State banks,
trust companies, or other corporations which compete with
national banks, the granting to and the exercise of such powers
by national banks shall not be deemed to be in contravention
of State or local law within the meaning of this chapter. ‘1
From a reading of this section, it is apparent that the grant by the Board of
Governors is limited to the state ‘Iin which the national bank is located, ‘1 and
Honorable P. Frank Lake, page 6 (WW-I&3,)
therefore, such a grant to a national bank located in Arkansas cannot sup-
port its attempt to conduct a trust .business in Texas. Boatmen’s National
Bank of St. Louis v. Hughes, 385 Ill. 431, 53 N.E.2d 403, 153 A.L.R. 402
(1936).
Since the applicant represents that it desires to act in a fiduciary
capacity in the State of Texas , we direct its attention to Section 105a of the
Texas Probate Code, (Acts 57th Leg., R.S., 1961, Ch. 31, p. 46).
SUMMARY
The Secretary of State should not accept and
file the application of a foreign national bank for a
certificate of authority to transact a trust business
in Texas under the terms of Article 1513a, V. C.S.
Yours very truly,
WILL WILSON
Attorney General of Texas
A%%sb
Dudlev b. McCalla
Assistant Attorney General
DDM:lmc
APPROVED:
OPINION COMMITTEE:
W. V. Geppert, Chairman
Bob E. Shannon
J. C. Davis
Arthur Sandlin
REVIEWED FOR THE ATTORNEY GENERAL
BY: Leonard Passmore