Untitled Texas Attorney General Opinion

The Attorney General of Texas
JIM MAl-fOX June 6, 1986
Attorney General
Supreme Court Bulfdlng Honorable Chet Brooks Opinion No. JM-498
P. 0. Box 12548
Chairman
Austin, TX. 78711.2545
5121475-2501 Committee on Health and Human Re: Whether article 342-903,
Telex 9101874.1367 Resources V.T.C.S.. which broadens the
Telecopier 512/475.02SE Texas State Senate definition of "drive-In/walk-
P. 0. Box 12068, Capitol Station up facility" contravenes the
714 Jackson. Suite ID0
Austin, Texas 78711 constitutional prohibition
Dallas. TX. 75202-4506 against branch banking
214/7428944
Dear Senator Brooks:
4824 Alberta Ave., Suite 160
El Paso, TX. 7S9052793
Article XVI, section 16, of the Texas Constitution prohibits a
9151533-3464 bank from engaging in business at more than one location. You ask
whether a bill enacted by the Sixty-ninth Legislature amending article
342-903, V.T.C.S., the statute prohibiting so-called "branch banking,"
1001 Texas, Suite 7DO is constitutional. In addition to the operation of detached facili-
Houston. TX. 77DO2.3111
ties authorized by previous amendments, the 1985 amendment permits the
713/2235888
operation of one "drive-in/walk-up facility" within 20,000 feet of the
bank's central building, a distance just short of four miles. It
806 Broadway, Suite 312 defines "drive-in/walk-up facility" to mean
Lubbock. TX. 78401.3479
SW747.5235 a facility offering banking services solely to
persons who remain . . . in a building having a
4309 N. Tenth, Suite B secured teller lobby during the transaction of
MeAllen, TX. 7850%1885 business with the bank.
51215824547
Your question arises out of a particular fact situation of which
200 Main Plaza. Suite 400 you have been apprised. You indicate that two state banks in Dallas
San Antonio. TX. 782052797 have merged pursuant to article 342-308, V.T.C.S. Both state banks
51212254191 are wholly-owned by the same bank holding company. Both facilities
offer full banking services and operate under the name of one of the
banks involved in the merger, now designated the "resulting bank."
An Equal Opportunity/
Affirmative Action Employer The resulting bank regards the central building of the other as its
"drive-in/walk-up facility" under the purported authority of the
newly-amended article 342-903, V.T.C.S., because it is located within
20,000 feet of the resulting bank's central building and because it
offers banking services to persons who remain "in a building having a
secured teller lobby during the transaction of business with the
bank." You wish to know whether the statute, if it fairly can be read
to authorize such a practice, violates article XVI, section 16. of the
Texas Constitution. We answer your question in the affirmative.
p. 2266
Honorable Chet Brooks - Page 2 (Jbi-498)
Article XVI, section 16, of the Texas Constitution provides the
f olloving:
Sec. 16. (a) The Legislature shall by general
laws, authorize the incorporation of corporate
bodies with banking and discounting privileges, and
shall provide for a system of State supervision,
regulation and control of such bodies which will
adequately protect and secure the depositors and
creditors thereof.
No such corporate body shall be chartered until
all of the authorized caoital stock has been sub-
scribed and paid ,in full in cash. Except as may be
permitted by the Legislature pursuant to Subsection
(b) of this Section 16, such body corporate shall
not be authorized to engage in business at more
than one place which shall be designated in its
charter.
No foreign corporation, other than the national
banks of the United States domiciled in this State,
shall be permitted to exercise banking or dis-
counting privileges in this State.
(b) If it finds that the convenience of the
public will be served thereby, the Legislature may
authorize State and national banks to establish and
operate unmanned teller machines within the county
or city of their domicile. Such machines may
perform all banking functions. Banks which are
domiciled within a city lying in tvo or more
counties may be permitted to establish and operate
unmanned teller machines within both the city and
the county of their domicile. The Legislature shall
provide that a bank shall have the right to share
in the use of these teller machines, not situated
at a banking house. which are located within the
county or the city of the bank’s domicile, on a
reasonable, nondiscriminatory basis, consistent
with anti-trust laws. Banks may share the use of
such machines within the county or city of their
domicile with savings and loan associations and
credit unions which are domiciled in the same
county or city.
(c) A corporate body created by virtue of the
power granted by this section, notwithstanding any
other provision of this section, has the same
p. 2267
Honorable Chat Brooks - Page 3 (JN-498)
rights and privileges that are or may be granted to
national banks of the United~ States domiciled in
this State. (Emphasis added).
As a preliminary matter, it has been suggested that, because of
subsection cc), we should look first to federal law to determine
whether the practice in which the two banks have engaged is authorized
by federal law. If so, the argument runs, the practice would then be
authorized by the Texas Constitution. Accordingly, we turn to 12
U.S.C. section 36, the so-called McFadden Act, which permits national
banks to branch in certain limited situations.
Essentially the federal act permits the operation of a branch
bank by a national bank in three situations. See generally Annots.,
30 A.L.R. 927 (1924). 50 A.L.R. 1340 (1927). 136 A.L.R. 471 (1942).
First, a national bank may retain any branch. that it operated lawfully
as of the date on which the McFadden Act became effective, February
25, 1927. 12 U.S.C. 536(a). Second, a national bank may operate a
branch, with the approval of the Comptroller of the Currency, under
the same conditions in which a state bank may operate a branch. 12
U.S.C. 136(c). Third, a national bank may operate a branch if the
national bank resulted from a conversion of a state bank to a national
bank and the state bank lawfully operated a branch prior to the
conversion or if the national bank, called the “resulting bank,”
resulted from the consolidation or merger of a national bank with
another bank. 12 U.S.C. 136(b). In this last Instance, the resulting
bank is authorized to operate the main office (or branch office) of
the other bank if the operation of branch banks is otherwise permitted
by state law and if the Comptroller of the Currency annroves of its
continued operation. See First National Bank v. Dickinson. 396 U.S.
122 (1969); First NatI= Bank of Logan v. Walker Bank & Trust Co.,
385 U.S. 252 (1966). See generally Annots., 52 A.L.R. Fed. 649
(1981); 23 A.L.R. 3d 683 (1969). Because the operation of s branch by
a national bank in the event of a consolidation or merger with another
bank. is still contingent upon the existence of state law permitting
the operation of such a branch, federal law coupled with subsection
(c) of article XVI, section 16, of the Texas Constitution does not
provide any independent authority for a state bank to operate a branch
in the event of a merger.
Texas is not alone in prohibiting branch banking. Eleven states
currently prohibit it. Twenty-one states permit it on a
less-than-statewide basis. Eighteen states permit it on a statewide
basis. See generally. Schlicting, Rice and Cooper, Banking Law, Vol.
I, $55.01-5.06; 8.01-8.06. Texas, however, is the only state that
prohibits absolutely branch banking in its constitution. (The
Illinois constitution prohibits branch banking, but it authorizes its
legislature by a specified vote to permit it). Indeed, until the
adoption of article XVI, section 16, in 1904, Texas prohibited the
p. 2268
llonorable Chet Brooks - Page 4 W-498)
creation of banking corporations, not simply branches thereof; the
Texas Constitutions of 1845, 1861, and 1866 each prohibited the
creation of corporations with “banking or discounting privileges.”
Tex. Const. (1845) art. VII, section 30; Tex. Const. (1861) art. VII,
section 30; Tex. Const. (1866) Art. XVI, section 30. The Constitution
of 1869 did not include such a provision: it was restored in the 1876
constitution. See generally, 2 G. Braden, The Constitution of the
State of Texas: An Annotated and Comparative Analysis, pp. 739-742
(1977). The prohibition reflected the widespread mistrust of
financial organizations and the fear of concentration of financial
power. See “Interpretative Commentary” to Texas Constitution, article
XVI. section 16; see generally First National Bank of Beaumont v.
Union Trust Co., 155 S.W. 989 (Tex. Civ. App. 1913, writ ref’d);
Burleson v. Davis, 141 S.W. 559 (Tex. Civ. App. 1911, writ ref’d).
With the adoption in 1904 of article XVI, section 16, the
constitution permitted the establishment of a state banking system.
The original House Joint Resolution to amend article XVI, section 16,
contained no prohibition on branch banking; the House ultimately
adopted an amendment containing the prohibition. In a study submitted
on August 18, 1952, by the Attorney General to the State Banking
Board, this office declared at pp. 5-7:
Although we have found no direct evidence as to
the purpose and intent of the amendment [prohibit-
ing branch banking] the history of anti-trust
legislation in the 28;h Legislature furnishes some
explanation of how the idea of restricting corpor-
ations to one place of business came to the atten-
tion of the law makers and what was hoped to be
accomplished by such a restriction. Whereas the
popular resentment in Texas against the banking
business appears to have subsided to the point
that the electorate saw fit to remove the former
constitutional prohibition and to permit banking
institutions to be incorporated under the condi-
tions authorized in the 1904 amendment, during the
years prior to 1904 there had been no lessening of
popular distrust and fear of corporations in
general. Indeed, most of the intense anti-trust
feeling during those years was very closely, if
not entirely. associated in the public mind with
abuses of the corporate form of business
organization.
For a number of years prior to 1903 there had been
agitation for comprehensive anti-trust legisla-
tion, much of which was directly designed to limit
and regulate the activities of corporate business.
p. 2269
Bonorable Chet Brooks - Page 5 (JM-498)
One such regulation that was widely advocated
would have required that corporations in general
be prohibited from “establishing or maintaining
more than one plant or business,” . . . and be
restricted “as to its operations elsewhere. . . .I’
. . .
Governor Lanham’s Executive Message [of February
5, 19031, suggesting among other things that cor-
porations in general be prohibited from “operating
in more than one place,” was accompanied by
several proposed anti-trust laws, most of which
were enacted into law by the 28th Legislature.
The 1903 antitrust legislation still constitutes
[as of 19521 the bulk of the substantive
anti-trust law of the state. Thus it is reason-
able to assume that the Governor, at least, was of
the opinion that a prohibition against engaging
“in business at more than one place” had as one
purpose the same general objective as other
anti-trust measures, i.e.. prevention of trusts,
monopolies, and conspiracies in restraint of
trade. (Emphasis added).
Pursuant to article XVI, section 16, the legislature enacted a
branch banking statute, which has been amended nine times since its
enactment as article 3 of Chapter IX of the Texas Banking Code of
1943. The statute originally provided: “No state, national or
private bank shall engage in business in more than one place, maintain
any branch office, or cash checks or receive deposits except in its
own banking house.” Acts 1943, 48th Leg., ch. 97, subch. IX, 53, at
164. The subsequent amendments each retained the above language but
redefined and expanded the definition of “banking house.”
The 1957 amendment expanded the definition of “banking house” to
include office facilities whose nearest wall was located within 500
feet of the n,earest wall of the central building and was physically
connected to the central building by tunnel, passageway, or hallway
providing direct access between the central building and the connected
office facility or by pneumatic tube or other similar carrier. The
amendment contained a proviso essentially requiring the connected
facility to be located either within the same city block or within
contiguous city blocks or within a block located diagonally across
from the central building. Acts 1957, 55th Leg., ch. 220, 51, at 448.
See Attorney General Opinion WW-22 (1957) (operation of a “drive-in/
walk-up facility” which is located 185 feet from the bank’s building,
which accepts deposits, cashes checks, accepts payment on notes, and
handles the application for personal loans of $500 or less. and which
p. 2270
Honorable Chet Brooks - Page 6 (JM-498)
is connected to the bank’s building by two underground pneumatic tubes
and a closed circuit television cable contravenes the constitutional
proscription against engaging in business in more than one place).
The 1959 amendment amended the proviso contained in the 1957
enactment. It expanded the permissible distance between the central
office and the connecting facility to within 500 feet of the street
adjacent to the central building. Acts 1959, 56th Leg., ch. 123, 51,
at 213.
The 1963 amendment expanded the definition of “banking house”
further by dropping the proviso limiting the permissible distance
between the central building and the connecting facility to contiguous
city blocks. The “500 feet nearest wall-to-nearest-wall limitation”
was retained, as was the requirement that the facilities be connected
by either a physical structure such as a passageway or by a pneumatic
tube or other similar carrier. Acts 1963, 58th Leg., ch. 81, 56, at
134.
The 1971 amendment expanded the definition of “banking house” yet
again by specifically permitting the establishment in counties of at
least 350,000 population one automobile drive-in facility whose
nearest boundary was to be located no less than.500 feet nor more than
1,850 feet from the nearest wall of the central building and connected
to the central building by either a hallway or passageway providing
direct physical access, between the facility and the central building
or by a pneumatic tube or other similar carrier. The amendment
declared:
[T]he term ‘automobile drive-in facility’ as
herein used shall mean a facility offering banking
services solely to persons who arrive at such
facility in an automobile and remain therein
during the transaction of business with the bank.
Acts 1971, 62nd Leg., ch. 358, 61, at 1352.
The 1975 amendment extended the reach of the statute by dropping
the population bracket. It further extended the maximum distance
between the central building and the drive-in facility from 1,850 feat
to 2,000 feet and required that the two be connected either by a
passageway or hallway providing direct access between the two or “by
closed circuit television, pneumatic tube or other physically con-
nected delivery device.” The definition of “automobile drive-in
facility” remained unchanged. Acts 1975, 64th Leg.. ch. 215, §l. at
531.
The 1981 amendment expanded the maximum distance that could
separate the central building and the drive-in facility from 2,000
p. 2271
Honorable Chet Brooks - Page 7 (m-498)
feet to 3,500 feet. The facility was then designated "drive-in/
walk-up facility;" the amendment declared:
[T]he term 'drive-in/walk-up facility' as herein
used shall mean a facility offering banking
services solely to persons who remain outside of
the facility during the transaction of business
with the bank.
Acts 1981, 67th Leg., ch. 611, 91. at 2410.
The 1983 amendment expanded the definition of "banking house" in
three significant ways. First, the definition was expanded to include
in addition to the office facility located within 500 feet of the
central building, a provision first enacted in the 1957 amendment and
retained in every subsequent amendment, not more than two additional
office facilities whose nearest walls were located within 3,500 feet
of the central building and are physically connected to the central
building either by passageway or hallway providing direct access
between the central building and the connected office facility or by
closed circuit television or pneumatic tube or other physically
connected delivery device. Second, the maximum distance by which a
drive-in/walk-up facility was to be separated from the central wall of
the main building was increased dramatically from 3,500 feet to 10,500
feet, a distance only 60 feet short of two miles. Significantly, the
definition of "drive-in/walk-up facility" was expanded to read
a facility offering banking services solely to
persons who remain outside of the facility or in a
secured teller lobby during the transaction of
business with the bank. (Emphasis added).
Acts 1983. 68th Leg., ch. 374, 51, at 2042.
Finally the 1985 amendment expanded yet again the definition of
"banking house" to authorize the erection of "drive-in/walk-up
facility," in addition to those set forth in the 1983 enactment, which
is located within 20,000 feet of the central building, a distance of
just under four miles. The amendment contained a proviso that forbids
this additional facility to be located within the boundary lines of
any city or town that has a population of less than 5,000 and in which
a bank is already located. The definition of *drive-In/walk-up
facility" was amended to read:
a facility offering banking services solely to
persons who remain outside of the facility or in a
building having a secured teller lobby during the
transaction of business with the bank. (Emphasis
added).
p. 2172
Bonorable Chet Brooks - Page 8 (m-498)
Acts 1988, 69th Leg., ch. 484, II, at 4100.
We turn now to your specific request. The issue is whether,
article 342-903, V.T.C.S., as amended, permits a bank “to engage in
business at more than one place” in violation of article XVI, section
16 of the Texas Constitution. The threshold question to be addressed
is whether the services offered at such facilities constitute
“business” for purposes of the constitution, &, whether such
services constitute “banking.” The statute on its face does not limit
the services that can be offered at such a detached facility. We
assume that, at a minimum, such facilities accept deposits and permit
withdravals, i.e., accept “demand deposits.” Because the definition
of “drive-in/walk-up facility” set forth in article 342-903 specifies
that such facility offers “banking services,” it may appear super-
fluous to address this question. However, two early Texas authorities
seeminalv concluded that the services tvnicallv offered at teller’s
windows-‘were~ snot ~“banking” but only &idental to banking, Great
Plains Life Insurance Company v. First National Bank of Lubbock, 316
S.W.2d 98 (Tex. Civ. App. - Amarillo 1958, writ ref’d n.r.e.) and
Attorney General Opinion V-1046 (1954). Consequently, even though the
statute does not require it, as a practical matter banks typically
limit services offered at drive-in facilities to services generally
offered at teller’s windows. The remaining and subsequent Texas
authorities clearly assumed that the offering of such services does
constitute “banking.” It should be noted that the aforementioned
authorities concluded that, under the factual situations that each
addressed, the existence and nature of a physical connection between
the bank’s central building and the detached facility snd the distance
separating the two were such that the facilities became mere physical
extensions of the central buildings. Accordingly, their precedent181
value as to what constitutes “engaging in business” is questionable
since such holdings were unnecessary.
If the services actually offered at a “drive-in/walk-up facility”
do constitute “banking,” the second question must be whether the
distance permissibly separating the facilities and the existence and
nature of the physical connection between the two authorized by
statute are such that they could be said to operate at “one place.”
We note that no Texas court has been confronted with this question,
and the last attorney general opinion that addressed the matter was
issued in 1975. Then the distance authorized by statute that could
permissibly separate the bank’s central building from the
“drive-in/walk-up facility” was 2,000 feet as opposed to the distance
now permitted, 20,000 feet, and the definition of “drive-in/ walk-up
facility” did not purport to Include within its ambit a detached
building into which customers could enter.
The only Texas case to consider whether the operation of a drive-
in facility by a bank violates the branch banking prohibition is Great
p. 2273
Honorable Chet Brooks - Page 9 (JM-498)
Plains Life Insurance Company v. First National Bank of Lubbock, 316
S.W.2d 98 (Tex. Civ. App. - Amarillo 1958, writ ref’d n.r.enrein-
after Great Plains]. In Great Plains a lessor sued his lessee to
cancel a lease of his premises for bank purposes on the theory that
the bank, by operating a drive-in facility consisting of drive-in
teller cages located across the street from the bank’s central
building and connected directly and physically thereto by a pneumatic
tube, was operating an illegal branch bank in violation of article
XVI, section 16, of the Texas Constitution. The court concluded that
such was not the case:
As we understand a branch bank it is a separate
entity and deposits made in a branch bank are
payable there and only there unless the branch
bank be closed on [sic] demand for the payment by
‘the depositor be refused, then the demand for pay-
ment will be against the mother bank. Branch
banks are not mere teller’s windows. For the
convenience of its depositors these teller’s win-
dows were established to permit a depositor to
drive in and make a deposit, and there is nothing
in this record to show that the tellers of the
drive in portion of the bank had any more author-
ity than any of the tellers in the bank building
proper. This drive-in depository is nothing more
than a part of the appellee bank. All deposits
made at the teller’s windows are placed in appel-
lee bank. We have not been cited to a Texas case,
and neither have we found one, directly determin-
ing that a bank can or cannot do the things as
were done under this record.
The Great Plains court seemed to rely on the reasoning set forth
in a 1927 Kentucky Court of Appeals case, Marvin v. Kentucky Title
Trust Co., 291 S.W. 17 (KY. 1927). In the 1927 Kentucky case, the
bank sought to operate separate offices for the purposes of cashing
checks, accepting deposits. and keeping records of such transactions
in different parts of a city with no direct physical connection
between the central building and the ancillary offices.
The Kentucky Court of Appeals had earlier concluded that banks
had no inherent right to branch; they could do so only if specifically
authorized by law. Kentucky law at the time was silent as to whether
banks could branch. Accordingly, the court held that they could not.
Bruner v. Citizens’ Bank of Shelbyvllle. 120 S.W. 345 (Ky 1909). The
court in Marvin framed the issue thus:
whether appellee’s plan to open offices for the
receipt of deposits and payment of checks will
p. 2274
Honorable Chet Brooks - Page 10 (JM-498)
constitute the establishment of branch banks, so
that the case may be said to turn upon the
definition of banking.
291 S.W. at 17. The court of appeals noted that Bruner expressly
recognized the right of a bank under Kentucky law to have as many duly
appointed agents as it needs who could, inter alla, receive deposits
and forward them to the bank’s central office. The court concluded
that such duties were
incidental to the business . . . which do not
require special discretion and business acumen.
291 S.W. at 18. The court then offered the following illustration,
which Great Plains quoted:
If a bank occupies an entire city block, can it
be doubted that it can establish an office for the
receipt of deposits and payment of checks at each
corner of its building and keep separate books at
each place? Clearly the installation of such
offices in the building is incidental to that
business, and such an arrangement would have no
injurious effect upon the financial management and
control of the bank’s business, as the officials
charged with those duties do not devote their time
to the details of the receipt of deposit or pay-
ment of checks. If such additional offices can
be established at different points in the main
building under the bank’s control, no good reason
appears why they may not be established elsewhere
throughout the city of its location for the same
purpose. The convenience to the general public of
such an arrangement is easily perceived. The time
consumed by a great number of depositors in making
daily trips to and from banks of deposit during
business hours calls for some measure of economy
and renders the arrangement suggested very desir-
able, and as it is clearly incidental to the
bank’s business and neither violates the statute
nor public policy and the judgment of the court
limits its application to the matter of receiving
deposits and paying checks, no good reason can be
perceived for denying the application. (Emphasis
added).
p. 2275
Honorable Chet Brooks - Page 11 (JM-498)
The claim that the holding of Great Plains stands in Support
of the proposition that article 342-903, as presently amended, is
constitutional is disingenuous at best. First, reference to and
apparent reliance on the Kentucky case was unnecessary and inapposite;
the inclusion of language from the Kentucky case is mere dicta. On
the basis of the differing facts, the two cases are easily distin-
guishable. In the Kentucky case, the bank sought to operate separate
offices for the purposes of cashing checks, accepting deposits, and
keeping records of such transactions in different parts of a city with
no direct physical connection between the central building and the
ancillary offices. In Great Plains. on the other hand, the central
building and the drive-in facility were physically connected directly
by a pneumatic tube and the facility was located across the street
from the bank’s building. The holding in Great Plains is necessarily
limited to its facts.
Second, the Great Plains case itself is unclear as to what
rationale it employed in order to determine whether the questioned
practice constitutes branch banking. The Kentucky case upon which the
Great Plains court ostensibly relied predicated its holding upon a
“services offered” approach, &, the services offered were merely
incidental to banking and the offer of such services did not consti-
tute “banking.” Therefore, the establishment of facilities that pro-
vided such services at locations far removed from the central bank
building were not denominated branch banking. That is why the court,
while acknowledging that Kentucky law did not authorize branch
banking, concluded that there was no impediment to the bank esta-
blishing such offices throughout the city.
Arguably then, Great Plains stands for the proposition that the
services typically offered at a “drive-in/walk-up facility” do not
constitute “engag[ingl in business” and therefore do not fall within
the ambit of the article XVI, section 16, proscription. However, the
Great Plains court also focused upon the existence and nature of the
physical connection between the bank’s central building and the
detached facility and the distance separating the two -- a “physical
connection approach” -- and specifically held that the facility was
nothing more than a part of the bank. It concluded that it was, in
effect, an extension of the bank’s central building, rather than a
branch. If the drive-in facility in Great Plains were a mere physical
extension of the bank’s central building, then no article XVI, section
16, question was implicated and any discussion of the nature of the
services offered is surplusage. On the other hand, if the nature of
the services offered at the drive-in facility did not constitute
banking, then any discussion as to whether the facility is a branch or
a part (or extension) of the bank’s central building is superfluous.
At most, Great Plains stands for the proposition that a drive-in
facility, ancillary to the central building though contiguous and
p. 2276
Honorable Chet Brooks - Page 12 (JM-498)
physically connected to it by pneumatic tube, is merely an extension
of the central building.
In Attorney General Opinion V-1046 (1950). this office concluded
that the construction on another lot directly across the street from
the bank's "banking house" of a garage that contains a drive-in depos-
it window or windows which accept deposits and permit withdrawals and
that is permanently and structurally attached to the bank's building
by a tunnel suitable for passage back and forth did not contravene the
constitutional prohibition on branch banking. The reasoning employed
in the opinion, just as that employed in the later Great Plains case,
is unclear; it too failed to distinguish between a "services offered"
test, which of course relies upon an analysis of the definition of
banking and the services offered at the off-premises facility, and a
"physical connection" test, which assumes as a given that the services
offered et such a facility are "banking" and focuses upon the nature
of the "physical connection" between the two facilities in order to
determine whether the additional facility is in fact "off-premises."
The opinion also relied upon and quoted extensively from the afore-
mentioned Kentucky case and seemed to hold that the services offered
did not constitute banking; yet, at the conclusion of the opinion, it
apparently held that the contemplated structure would become, as it
were, a mere extension of the physical structure of the central build-
ing and would therefore not violate the statutory prohibition of cash-
ing checks or accepting deposits at any place other than the bank's
"banking house." It should be obvious, however, that, if the services
offered do not constitute "banking," then the constitutional issue
would not come into play; the only limitations would then .be those
contained in the statute. There would be no constitutional impediment
to keep a bank in, say, Amarillo from operating such a facility in
Orange. On the other hand, if a structural connection of some defined
sort is deemed sufficient to create one facility out of two, then,
again, no constitutional question arises.
The remaining Attorney General Opinions all assumed that the
sorts of services offered at "drive-in/walk-up facilities" constitute
"banking." Unlike Great Plains and Attorney General Opinion V-1046,
which arguably concluded that such services are not "banking" but
rather are incidental to banking, all implicitly invoked first the
"services offered" test and assumed that the offering of such services
is banking; they focused then on the "physical connection" test and
analyzed whether the offering of such services in various situations
is "off-premises." Attorney General Opinions H-1292 (1978); H-1084
(1977); H-277 (1974); H-100 (1973); M-915, M-849 (1971); M-273 (1968);
NW22 (1957); Letter Advisory No. 96 (1975).
Attorney General Opinions M-273 (1968). M-915 (1971). H-100
(1973), H-277 (1974), and H-1292 (1978) all considered whether the use
of unmanned (or automated) teller machines, when used in various fact
p. 2277
Honorable Chet Brooks - Page 13 (JM-498)
situations, constituted "banking." The services offered ranged from
the accepting and receipting of bank deposits, Attorney General
Opinion M-273, to the cashing of checks (or withdrawal of cash from
accounts or dispensing of cash packets after an account verification),
Attorney General Opinions M-915, H-277, H-1292, to withdrawal of cash
from bank checking or savings accounts , accepting deposits to checking
or savings accounts, accepting inter-account transfers, and accepting
payments to a credit card account, Attorney General Opinion H-100,
supra. All of the opinions concluded , either implicitly or explicitly,
that such services, the same sorts of services typically offered by a
"drive-in/ walk-up facility," are "banking." In Attorney General
Opinion M-273, w, this office declared:
[Tlhe user of a mechanical contrivance to perform
these operations will not render them non-banking
operations which are outside the general and usual
rules governing and restricting branch banking.
"Branching" is defined by both state and federal
law in terms of end results and not in terms of
any instrumentality or agency by which such
results are accomplished . . . . In our opinion
the facilities described in your letter are
clearly banking facilities.
The operation of unmanned (or automated) tellers (sometimes known
as CBCTs, i.e. Customer-Bank Communication Terminals) was finally
authorized b-the 1980 amendment adding subsection (b) to article XVI,
section 16, of the Texas Constitution after an earlier amendment
authorizing their operation was defeated in 1977. -See V.T.C.S. art.
342-903c.
Attorney General Opinion M-849 and Attorney General Letter Advis-
ory No. 96. which addressed whether the 1971 and 1975 amendments to
article 342-903. respectively , were constitutional, also assumed that
the sorts of services typically offered at a "drive-in/walk-up facil-
ity" are "banking." Attorney General Opinion M-849 quoted with ap-
proval from Kaliski v. Gossett, 109 S.W.2d 340. 344 (Tex. Civ. App. -
San Antonio 1937, writ ref'd.). which contains the following language:
In the case of In re Prudence Company (C.C.A.) 79
F.(2d) 77, 79, we find the following definition of
a bank: 'Strictly speaking the term bank implies
a place for the deposit of money, as that is the
most obvious purpose of such an institution'; the
opinion continues: 'And all of the cases, so far
as we are advised, which have construed the words
"banking corporations" as used in the Bankruptcy
Act, have regarded the legal power to receive
p. 2278
Bonorable Chet Brooks - Page 14 ,(JM-498)
deposits as the essential thing.' [Citations
omitted].
As this office declared in Attorney General Opinion WW-22(1957):
While the powers of a state bank in Texas are
enumerated in Article 342-301, V.T.C.S., most of
the decisions throughout the United States
recognize that the ordinary essential features of
the banking business are the power to accept
deposits of money repayable to the order of the
depositor, the discounting of commercial paper,
the issuance of negotiable notes, and the lending
of money upon security. Warren v. Shook, 91 U.S.
704. 23 L. Ed. 421, 9 C.J.S. 31; Zollmann, Banks
and Banking, Volume I, Section 67.
Many of the decisions and authorities through-
out the United States recognize that not all of
these banking functions need be exercised in order
to constitute an institution a bank. The exercise
of some of the functions of banking such as
loaning money, selling bonds, receiving deposits
or cashing checks may be sufficient to bring the
institution within the regulations passed by the
state relative to banks. Ealiski v.~ Gossett~, 109
S.W.2d 340 (Tex. Civ. App. 1937); Zollmann, Banks
and Banking, Volume I, Section 67.
See also Brenham Production Credit Association v. Zeiss. 264 S.W.2d 95
(Tex. 1953).
Indeed, a brief submitted to this office by the Texas Bankers'
Association in connection with Attorney General Opinion H-1084 (1977)
claimed that the taking of deposits was essential to the definition of
a "banking business" and cited U.S. v. Philadelphia National Bank, 374
U.S. 321 (1963) for the following proposition: "Commercial banks are
unique among financial institutions in that they alone are permitted
by law to accept demand deposits." The brief went on to cite a series
of cases from various jurisdictions, including Texas, essentially in
support of that proposition.
It is suggested that the recent case of Board of Governors of
Federal Reserve System v. Dimension Financial Corporation, U.S.
-, 106 S. Ct. 681 (1986) [hereinafter Board of Governors], which
strictly construed the definition of "bank" for purposes of the Bank
Holding Company Act of 1956. 12 U.S.C. $51841 et seq., is relevant to
this discussion. The Bank Rolding Company Act defines "bank" as any
institution "which (1) accepts deposits- that the depositor has e
p. 2279
Honorable Chet Brooks - Page 15 (JM-498)
legal right to withdraw on demand, and (2) engages in the business of
making commercial loans." 12 U.S.??%1841(c) (Emphasis added.) In
Board of Governors, the Supreme Court struck down board rules promul-'
gated pursuant to the act that it felt employed an overly-expansive
definition of "bank." Under the Bank Holding Company Act (which
applies both to state and national banks), a "bank" must both accept
demand deposits and engage in commercial banking. If suchadefini-
tion were appliedto the services typically offered at a "drive-in/
walk-up facility," it is argued, then such a facility could not be
held to engage in banking. The case is inapposite for three reasons.
First, the provisions of the Bank Holding Company Act are
inapplicable to both the McFadden Act and Texas case law definition of
"bank." This office noted the following in Attorney General Opinion
H-606 (1975):
Pursuant to its authority to assess state law in
the regulation of bank holding companies, Whitney
National Bank in Jefferson Parish v. Bank of New
Orleans 6 Trust Co., 379 U.S. 411 (1965). the
Federal Reserve Board has held Texas' branch bank-
ing laws to be inapplicable to stock ownership by
holding companies. Application of Farmers and
Mechanics Trust Company of Childress. Texas
(Federal Reserve Bulletin, January, 1960, pp. 14,
16); cf. Application of Trans-Nebraska Co.,
Lincoln>ebraska (Federal Reserve Bulletin, May,
1963, pp. 633, 634). This ruling was based on the
legislative history of the Banking Holding Company
Act of 1956 which states in part:
The purposes of branch banking laws are not
identical with the purpose of this bill to control
bank holding companies . . . It is believed the
bill contains adequate provisions to regulate bank
holding company operations without an arbitrary
tiein [sic] with branch banking laws. 1956 U.S.
Code Cong. Ad. News, 84th Congress 2492-2493.
Second, the definition of "branch bank" set forth in the McFadden
Act is of greater relevance to this inquiry than the definition
contained in the Bank Holding Company Act. The McFadden Act provides
the following at 12 U.S.C. 936(f):
The term 'branch' as used in this section shall be
held to include any branch bank, branch office,
branch agency, additional office, or any branch
agency, additional office, or any branch place of
p. 2280
Honorable Chet Brooks - Page 16 (X4-498)
business . . . at which deposits are received, or
checks paid, or money lent.
The Supreme Court has declared that
the term 'branch bank' at the very least includes
s place for receiving deposits or paying checks
or lending money apart from the chartered
premises; it may include more. It should be
emphasized that, since [the act] is phrased in the
disjunctive, the offering of any of the three
services mentioned in that definition will provide
the basis for finding that 'branch' banking is
taking place.
First National Bank in Plant City, Florida v. Dickinson, 396 U.S. 122,
134 (1969).
While the determination as to what constitutes a branch is
admittedly a matter of federal law. the court's construction is
persuasive since the act was intended to foster "competitive equality"
between state and national banks. First National Bank of Logan v.
Walker Bank 6 Trust Co., 385 U.S. 252, 261 (1966). For this reason, a
branch of a national banking association may be established only when,
where, and how state law would authorlee a state bank to establish and
operate such a branch. St. Louis County National Bank v. Mercantile
Trust Company National Association, 548 F.2d 716 (8th Cir. 1976),
cert. denied 433 U.S. 909 (1977).
Third, the statute authorizes a “drive-in/walk-up facility" to
offer "banking services" without either specifying or limiting just
what services may be offered. The fact that any specific
"drive-in/walk-up facility" does not offer a full range of "banking
services" is irrelevant when the issue is whether the statute that
authorizes the offering of "banking services" is constitutional.
In spite of the language seemingly to the contrary in Great
Plains and Attorney General Opinion V-1046, we think that the great.
weight of authority in Texas and in other jurisdictions, as well as
the plain language of article 342-903, support the proposition that
the sorts of services typically offered at a "drive-in/walk-up
fscility." which at a minimum include withdrawal of cash from and
accepting deposits to banking accounts, do constitute "banking." The
remaining issue is whether the sort of physical connection and the
authorized distance separating the central building and the facility
permitted by the statute violate the constitutional prohibition
against "engag[ingl in business at more than one place." We conclude
that, taken together, they do.
p. 2281
Honorable Chet Brooks - Page 17 (JM-498)
No Texas case has defined specifically the meaning of the phrase
“one place” for purposes of article XVI, section 16(a). To the extent
that Great Plains can be said to construe the phrase, the case stands,
only for the proposition that a bank that operates a “drive-in/walk-up
facility” located across the street from the bank’s central building
and connected therewith by a pneumatic tube can be said to engage in
business in not more than one place. Since the fact situation con-
sidered therein. is almost identical to that considered in Great
Plains, Attorney General Opinion V-1046 (1950) can also be so ch=
terized. Both Attorney General Opinion M-849 (1971) and Letter
Advisory No. 96 (1975) discussed specific proposed amendments to
article 342-903, but neither attempted to define what actually cocsti-
tutes “one place .‘I
The claim that both stand in support of the proposition that
article 342-903, as presently amended, is constitutional mischaracter-
izes both. First, Attorney General Opinion M-849 specifically did not
rule on the constitutionality of the 1957 amendment or the 1963 amend-
ment , amendments which expanded the definition of “banking house” far
less dramatically than did the 1985 amendment:
This Office has never issued an opinion as to the
constitutionality of the 1957 amendment or the
1963 amendment to article 342-903, and nothing in
this present opinion is intended as a ruling
thereon.
Second, Attorney General Opinion M-849, which considered the
constitutionality of what subsequently became the 1971 amendment,
declined to hold as a matter of law that the proposed amendment did
not cdntravene the constitutional prohibition:
Both H.B. 566 [which was substantially enacted as
the 1971 amendment] and S.B. 409 have eliminated
from the concept and definition of ‘banking house’
the physical connection aspect of the statute, as
it now exists, and authorize a banking house to be
connected only by closed circuit television or
other similar means of communication.
If this office were to hold that a ‘banking
house’ could be authorized to extend its place of
business 500 feet or 1,850 feet from its main
banking house, connected only by closed circuit
television or other similar means of communice-
tion, then we would have to conclude that this
manner of connection between the main banking
house and its drive-in windows, or office faci-
lities, irrespective of the distance, would be
p. 2282
Honorable Chet Brooks - Page 18 (JM-498)
compatible with the constitutional provisions. We
cannot so conclude as a matter of law, because the
bills fail to provide sufficient factors and
guidelines to support that conclusion.
The opinion failed to specify exactly what “factors” or “guidelines”
would have been sufficient to warrant a conclusion. The opinion
concluded that the meaning of the phrase “one place” in article XVI,
section 16,
is constitutionally a mixed question of law and
fact, [and] any ultimate finding of ‘one place’
under the Constitution must take into account all
of the relevant facts and circumstances pertaining
to the doing of the banking business at ‘one
place. ’
The opinion then declined to rule on any hypothetical question or any
mixed question of law and fact that might conceivably arise in apply-
ing the proposed statutes to any given state of facts.
Attorney General Letter Advisory No. 96 (1975), Considering what
was subsequently enacted as the 1975 amendment that permitted the
physical connection separating the central building and the detached
facility to be merely a closed circuit television cable and expanded
the permissible distance separating the two to 2,000 feet, noted the
paucity of authority at the time Attorney General Opinion M-849 was
issued and declared:
In the context of Senate Bill No. 642 and its
limitation of the distance of separation [expanded
from 1,850 feet to 2,000 feet], we can determine
no meaningful distinction between a connection by
pneumatic tube and one by closed circuit tele-
vision cable. In both instances the bank’s
business in [sic] conducted in ‘one place’ within
the meaning of section 16, so long as the drive-in
facility is limited to teller services. (Emphasis
added).
The opinion failed to explain by virtue of what constitutional,
statutory, or case law authority such facilities could be limited to
teller services.
So at most, Attorney General Opinion M-849 stands for the
proposition that the question whether a “drive-in/walk-up facility”
located 1,850 feet from the bank’s central building is a branch is a
mixed question of law and fact. Attorney General Letter Advisory No.
96 at most stands for the proposition that. in en instance in which a
p. 2283
Honorable Chet Brooks - Page 19 (JM-498)
“drive-in/walk-up facility” is located not more than 2,000 feet from
the bank’s central building, a connection as tenuous as a closed cir-
cuit television cable permits banking business to be conducted in “one
place. ” When these opinions were issued there was an admitted dearth
of judicial authority in this area, from either Texas or other juris-
dictions. We need not determine, however, the meaning of “one place”
for purposes of article XVI, section 16, because a 1980 constitutional
amendment has done it for us.
In November of 1980, the voters of Texas adopted a constitutional
amendment that re-enacted article XVI, section 16, and added what is
now subsection (b), permitting banks to operate detached automated
teller facilities. An earlier attempt to amend the section to permit
the operation of such facilities failed of passage in 1977. In order
to permit the operation of such detached facilities, a constitutional
amendment was necessary because. absent an amendment, such opera-
tion would have violated the constitutional proscription against
“engag[ing] in business at more than one place.” Attorney General
Opinions H-1292 (1978); H-277 (1974); H-100 (1973); M-915 (1971). The
amendment as adopted, provided the following:
Section 1. That Article XVI, Section 16, of the
Texas Constitution be amended to read as follows:
‘Sec. 16. Corporations with banking and dis-
counting privileges
(a) The Legislature shall by general laws,
authorize the incorporation of corporate bodies
with banking and discounting privileges, and shall
provide for a system of State supervision, regula-
tion and control of such bodies which will ade-
quately protect and secure the depositors and
creditors thereof.
No such corporate body shall be chartered until
all of the authorized capital stock has been sub-
scribed and paid in full in cash. Except as may
be permitted by the Legislature pursuant to Sub-
section (b) of this Section 16, such body cor-
porate shall not be authorized to engage in
business at more than one place which shall be
designated in its charter.
No foreign corporation, other than the national
banks of the United States domiciled in this
State, shall be permitted to exercise banking or
discounting privileges in this State.
p. 2284
Bonorable Chet Brooks - Page 20 (JM-498)
(b) If it finds that the convenience of the
public will be served thereby, the Legislature may
authorize State and national banks to establish
and operate unmanned teller machines within the
county or city of their domicile. Such machines
may perform all banking functions. Banks which
are domiciled within a city lying in two or more
counties may be permitted to establish and operate
unmanned teller machines within both the city and
the county of their domicile. The Legislature
shall provide that a bank shall have the right to
share in the use of these teller machines, not
situated at a banking house. which are located
within the county or the city of the bank's domi-
cile. on a reasonable, nondiscriminatory basis,
consistent with anti-trust laws. Banks may share
the use of such machines within the county or city
of their domicile with savings and loan associa-
tions and credit unions which are domiciled in the
same county or city.' (Emphasis added).
When properly construing a constitutional provision, we are
required to give effect to the intent of the people who adopted it.
Director of the Department of Agriculture and Environment v. Printing
Industries Association of Texas, 600 S.W.2d 264 (Tex. 1980); Cox v.
Robison, 150 S.W. 1149 (Tex. 1912). The meaning of a constitution is
fixed when it is adopted and is not different at any subsequent time.
Jones v. Ross, 173 S.W.2d 1022 (Tex. 1943); Cramer v. Sheppard, 167
S.W.2d 147 (Tex. 1943). In attempting to determine such intent,
[c]onstitutional provisions, like statutes, are
properly to be interpreted in light of conditions
existing at the time of their adoption, the
general spirit of the times, and the prevailing
sentiments of the people.
Mummev. Marrs. 40 S.W.7.d 31, 35 (Tex. 1931). As the Texas Supreme
Court later declared,
[I]n determining the meaning, intent and purpose
of a constitutional provision the history of the
times out of which it grew and to which it may be
rationally supposed to have direct relationship,
the evils intended to be remedied, and the good to
be accomplished, are proper subjects of inquiry.
Markowsky v. Newman. 136 S.W.Zd 808. 813 (Tex. 1940); Travelers'
Insurance Co. v. Marshall, 76 S.W.2d 1007 (Tex. 1934).
p. 2285
Bonorable‘Chet Brooks - Page 21 (JM-498)
When subsection (b) was added in 1980, which by its very terms
serves as an exception to the constitutional proscription against
banking "at more than one place," and the entire section was re-
adopted, the operation of certain detached facilities was already
permitted by statute. We think that a court, relying on the above
rules of constitutional construction, would probably conclude that the
inclusion of the phrase "banking house" in subsection (b) and the
re-adoption of the entire section in 1980 served to place the
imprimatur of the people on the then-existing statutory scheme
defining "banking house," expanding and defining, as it were, the
constitutional phrase "one place." The statutory amendment of article
342-903 then in effect provided the following:
No State, national or private bank shall engage
in business in more than one place, maintain any
branch office, or cash checks or receive deposits
except in its own banking house. For purpose* of
this article 'banking house' means the building in
whose offices the business of the bank is conduct-
ed and which is functionally one place of busi-
ness, including (a) office facilities whose near-
est wall is located within five hundred (500) feet
of the nearest wall of the central building and is
physically connected to the central building by
tunnel, passageway or hallway providing direct
access between the central building and the con-
nected office facility or by closed circuit tele-
vision or pneumatic tube or other physically con-
nected delivery device, and (b) in addition, if
authorized in the manner hereinafter provided, not
more than one (1) automobile drive-in facility
whose nearest boundary is located within two
thousand (2,000) feet of the nearest wall of the
central building but more than five hundred (500)
feet therefrom and is connected to the central
building by tunnel, passageway or hallway provid-
ing direct access between the central building and
the connected automobile drive-in facility or by
closed circuit television, pneumatic tube or other
physically connected delivery device. The entire
banking house shall for all purposes under the law
be considered one integral banking house. The
term 'automobile drive-in facility' as herein used
shall mean a facility offering banking services
solely to persons who arrive at such facility in
en automobile and remain therein during the trans-
action of business with the bank.
Since the adoption of the 1980 constitutional amendment, article
342-903, V.T.C.S., has been amended three times. The maximumdistance
p. 2286
Eonorable Chet Brooks - Page 22 (JM-498)
that may permissibly separate the bank's central building from a
"drive-in/walk-up facility" was increased from 2,000 feet to 3,500
feet to 10,500 feet to 20,000 feet, almost a trebling in one session
followed by a doubling in the next -- a ten-fold increase during the
past six years. The definition of "drive-in walk-up facility" was
amended during the past two legislative sessions with the effect that
a multi-story office building now falls within its ambit. If the
legislature may permissibly double (or triple) in each succeeding
legislative session the maximum distance that may separate a bank's
central building and its "drive-in/walk-up facility" (which may now
fairly be construed to be an office building), the maximum boundary
conceivably could soon be coterminous with the boundaries of the
state. Such a situation is certainly one which the constitutional
prohibition is intended to prevent.
Clearly, in passing upon the constitutionality of a statute, we
are required to begin with a presumption of constitutionality. Smith
v. Davis, 426 S.W.2d 827 (Tex. 1968); Ex parte Smith. 441 S.W.2d 544
(Tex. Grim. App. 1906). A statute should not be declared unconstitu-
tional unless it is plainly so. Maud v. Terrell. 200 S.W. 375 (Tax.
1918). Article 342-903, V.T.C.S., as amended, is plainly so. The
meaning of the words of a constitution at the time they were placed
therein cannot be altered or amended by subsequent legislation. Ex
parte Giles. 502 S.W.2d 774 (Tex. Cr. App. 1973). The 1985 statutory
amendments to V.T.C.S. article 342-903 about which you inquire
manifestly were attempts to do so.
We are not unmindful of the effect of our decision. But as the
Texas Supreme Court declared in Koy V. Scheider. 218 S.W. 479, 481
(Tex. 1920). the consequences of constitutional interpretation do not
control.
No matter how far-reaching and disastrous would be
the consequences . . . we would not decline to
make the declaration if such was believed to be
the true intent of the language of the Constitu-
tion.
Quoted in Director of the Department of Agriculture and Environment v.
Printing Industries Association of Texas, -. Cramer v. Sheppard,
167 S.W.2d 147 (Tex. 1943). See Shepherd v. San Jacinto Junior
College District, 363 S.W.2d 742-x. 1962).
Accordingly, in the situation which gave rise to your request, we
conclude that the central building of the merged bank which the
resulting bank now regards as its "drive-in/walk-up facility" is, as a
matter of fact and law. an impermissible "branch." We conclude that
the 1985 amendment to article 342-903. V.T.C.S.. which extends the
permissible distance separating a "drive-in/walk-up facility" from the
p. 2287
Honorable Chet Brooks - Page 23 (JM-498)
bank's central building to 20,000 feet and permits such facility to be
a "building having a secured teller lobby" is unconstitutional.
SUMMARY
The 1985 amendment to article 342-903,
V.T.C.S.. which extends the permissible distance
separating a "drive-in/walk-up facility" from the
bank's central building to 20,000 feet and permits
such facility to be a "building having a secured
teller lobby" is unconstitutional.
I
P I ’ nnu-.
Very truly
I
yours
-JIM MATTOX
Attorney General of Texas
JACKHIGHTONER
First Assistant Attorney General
MARYKELLER
Executive Assistant Attorney General
ROBERTGRAY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Jim Moellinger
Assistant Attorney General
p. 2288