Case Information
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TEEAITORNEY GENERAL OF-TEXAS Au~T~N~I.'~~xAR
GELRALDC. MANN
XIXXX ATTORNKY G*:SERAI-
Honorable George H. Sheppard Comptroller of Public Accounts
Austin, Texas
Dear Sir:
i;i.nion No. O-3526 : meaning of the term "book value" in Article 88la-53, V. A. C. S.
This is in reply to your inquiry as to how the term %ook value" in Article 881a-53, Vernon's Annotated Revised Civil Statutes of Texas, should be construed in the rendering of property, and the fixing of tax values thereon, of building and loan associations. Said Article 88la-53 is a part of a comprehensive act dealing with building and loan associations, and said article reads as
"Every building and loan association doing business in this state shall, in the city or town in which it is located to the tax assossor at the time fixed by law and in the fol- lowing manner: (a) The value or its office furniture and fixtures therein; (b) the value of all real estate in such city to which such association holds title; (c) the value of its assets therein in excess of an amount representing the total of (1) accounts payable and notes payable owing by such association; (2) the book value of the shares out- standing and (3) the assessed value of the furniture and fixtures and real estate held by such association and ren- dered by it for taxation." An examination of the dictionaries and the cases involving the term "book value" shows that it has a well understood meaning. Webster's New International Dictionary, 2nd Ed. Unabridged, gives a definition of "book value" as follows:
"The value of anything as shown by the books of account of the business owning it; spedif., ofstock, the value as indicated by the excess of assets over liabilities." In 11 Corpus Juris Secundum 521 it defines *book value" as
" . ..the value ascertained by deducting from the assets, carried on the books, the liabilities and other matters required to be deducted; the value as it appears from the books; the value as predicted on the market value of the assets of the company after deducting its liabilities, the value shown by the audit of the business of the company up to a date specified; and specifically in determining the value of a share of stock upon withdrawal from an associa- tion, it has been defined as meaning the proportionate amount of the net assets, including profits or losses, of the corporation, applied to a share of its stock...." In the case of Lane v. Barnard, (N. Y. Sup. CT.) 173 N. Y. S. 714, the court said:
" . ..The book value of stock ordinarily means the value thereof as shown by the assets and liabilities as carried on the books of the company,...n
In the case of Gurley v. %oodbuty, 177 N, 0. 97 S.E. 754, the court said:
"The meaning of "book value of stock" is well understood and its ascertained by deductingfrom the assets, carried on the books the liabilities and other matters required to be deducted fPeople v, Coleman, 107 N.Y. 541, 14 N.E. 431; Gabble, 111 App. Div. 426, 97 N.Y. Supp. 773...", Cabble v. In the case of Elhard v. Rott, 36 N.D. 221, 162 N.sf. 302, the
" . ..It means value as predicated on the face value of the assets of the corporation after deducting its liabilities. Steeg v. Leopold Bldg. & Imp. Co., 126 La. 101, 52 South, 232-235; CabSle V. Cabble, 111 App. Div. 426, 97 N. Y. Supp. 773-775; 1 idords and Pharses (Second Series) 479. The assets, of course, must appear upon the books of the company, and must be able to be estimated therefore, but it does not follow that the computation must have been made on such books and appear on the ledger. The book value of stock is determined by the face value of the assets as they appear upon the books..."
In the case of People v. Coleman, 107 N. Y. 541, 14 N. ii. 431, the court said:
"One mode of arriving at the actual value of the capital stoc!c of a corporation is to take what is sometimes called the "book valuen , which is reached by estimating all the assets as they appear upon the corporate books, and deduct- ing all the liabilities and other matters required to be deducted by law, and taking the balance as ths measure of value for assessment. This seems to be a proper method for arriving at the value of the capitaL stock in the case of a corporation which is about to discontinue business, wind up its affairs, holders;...s and distributo its assets among its share- The cases cited and quoted from above involved ordinary corpora- tions, and not building and loan associations, but we see no reason why the same definitions of "book value" would not apply to building and loan associations. Said organizations are de- fined in Article 8dla-1, Vernon's Annotated Revised Civil Statutes of Texas, as follows:
"A buildinS and loan association, as contemplated by this $7" iArts. 88la-1 to 8&a-68; P. CT Arts. 1136a-1 to 1136a-
1s any dssociation or corporation heretofore or here- after formed created or organized which is chartered under any building'and loan lack, and/or is principally in the business of assistins its members to buy, improve or build homes , or to remove the inculmbrances therefrom, and .which accumulates the fund s thus loaned through t!le issuance or sale of its oven sh,res.ff
tie have found one case construin;; the term "book value" with re- ference to building, and lo:n associationstock, and that ,isthe case of Thirteenth ?fard %ilding & Loan Association v. Ljeissberg, 115 N. J. %qo 467, 170 Atl. 662, 98 A. L. R. 134, in which the
"The withdrasial value should not be confused irith the "book value", The 'Wthdr~~~al value" is the :imount ictu~~lly paid, in addition to such proportion of the profits, or such rate of interest, as may he Prescribed by statute or by the by- lavfs. The f*book value" is the ;~roportionate amount of the net assets, including profits or losses, of the association, applied to a share of its stock, t&king into consideration the amount rictually paid in, and the length of time the association has had the use of the ;aoney...* There are no Texas a?pell:lte court cases, as far as :ie can find, approving a definition-1 of the term "book value." The term is mentioned in the cnse of iiineinzer v. Day, (Tex. Civ. App.) 58 S. >i;. (2d) S76, but no definition is adopted by the a;?pellate court. Ye see no reason why the Texas courts should not be governed by the SLi;te weli ~;nt,, --stood meaning of the term "book value" th;:Lt the courts of other states have alnost unanimously adopted.
. . - Hon. Geo. II. Sheppard, Page 4
Our ans;qer to your inquiry is that the term "book value* in Article Ma-53, V. A. C. S., means the value of the shares outstanding as shown by tho assets and liabilities as carried on the books of the building and loan association.
Yours very truly APPROVEU JIJNi3
ATTUWEY GENERAL OF TEXAS FIHST ASSISTANT BY ATTOWJiY GENERAL Cecil C. Xotsch
Assistant