Case Information

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Ron. Lee Brady, Commissioner Opinion No. O-2641 Department of Banking Re: Appropriation to State Austin, Texas Banking Department - Senate

Bill 427, ,Acts 46th Legis- Dear Sir: lature.

In your letter of ,August 16, 1940, you request the opinion of this department upon the following question:

1. Are expenditures any one class of corporation (under the supervi- sion of the Banking Department), limited to fees from that class of corporation? 2. Are expenditures under Item ‘7 (of appropriation to the State Banking Department Senate Bill 427, Acts of the 46th Legislature , 5 “Loan and Brokerage Divi- under the sub-caption sion” being a $19,000 appropriation labeled “Trav- eling Expense, Banking Department” limited to the payment of traveling expense in loan and companies, or may it be used to pay the expense of travel in supervision of banks? Is Item 8 (of the same appropriation) fol- 3.

lowing Item 7 above mentioned, limited to the pay- ment of premiums on bonds of employees charged with supervision of loan and brokerage companies?

As you state, the Banking Department is charged with the responsibility of supervising four distinct of fi- nancial institutions, namely, banks, building and loan associa- tions, and credit unions.

As to banks, Article 362, R.C.S., 1925, requires the expense of every general and special examination shall be paid by the bank examined in such an amount as the commissioner shall certify to be just and reasonable, and it further provides that assessments therefor shall be made by the commissioner upon the banks examined in proportion to the assets or resources held Article 363 re- by such banks upon the date of the examination, quires sums collected as examination from banks to be paid by the commissioner directly the State Treasury to the credit of the general revenue fund.

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Hon. Lee Brady, page 2.

As to building and loan associations, Article 881a- 9, Vernon’s Revised Civil Statutes, requires the banking com- missioner to collect from every domestic building association in lieu of examination fees, based upon gross assets, in accordance with a fixed schedule. This article re- quires the commissioner to assess enough against such associa- tion to carry out the provisions of the building and loan as- sociation act e This article further provides:

‘1. . . said fees when collected shall be placed in a separate fund with the State Treasurer to be ex- pended during the current year, or so much thereof as may be necessary in carrying out the provisions of this Act, and should there be an unexpended balance at the end of the year, the Banking Commissioner of Texas shall reduce the assessment the succeeding year so that the amount produced and paid in the State Treasury, together with said unexpended balance in the Treasury, will not exceed the amount appropriated the current year, to pay all necessary expenses of su- pervising the operation and examining the business the corporations doing business under the provisions of this Act, which funds shall be paid out upon requi- sition made out and filed by the Banking Commissioner of Texas, when the Comptroller shall issue warrants therefor.”

As to the loan and brokerage companies Article 1524a, Section 2, Vernon’s Revised Civil Statutes, requ res such class i of corporations to pay the actual traveling expenses, hotel bills, and all other actual expenses incident to such examina- tion, and a fee not exceeding one-eighth of one per cent of its actual paid-in capital.

By the provisions of Article 2465, Vernon’s Revised Civil Statutes, credit unions are required to pay the expense of each examination made of such credit union, but the statute requires that no charge shall be made for services except trav- eling, hotel and meal expenses and other actual expenses, and requires that the credit unions shall be furnished with an item- ized statement of such expenses.

The rider appended to the appro riation~ made to the State Banking Department, by Senate Bill E 27$ Acts of the 46th Legislature, requires that “all appropriations herein made for the State Banking Department shall be paid out of their receipts, and the Commissioner shall reduce his expenditures so as not to exceed the actual receipts collected.” Said rider further pro- vide s :

"For the purpose of enforcing the credit un- ion laws of this State, all fees collected under and by virtue of Chapter 11 Acts of the 41st Leg- islature, 4 balances are hereby and all unexpende appropriated to the Banking Department." As to the fees from building associations, is to be observed that the Legislature has required the creation of a separate fund for the deposit such fees, and it is clear that the Legislature contemplated that such fees should be dedicated solely to defraying the cost of administering the building and loan association law, and, further, that the cost of administering the building and loan association laws should be paid exclusively such separate funds. The appropriation bill passed by the 46th Legislature, confirms this observation by the use of the following language in the rider appended to S.B. 427:

"Sec. 3. It is further in the event the Statutes of the State of Texas provide that any amount, fees or funds herein appropriated to be paid out of local or special fees or funds or sa d 1 that the same be so paid out of said local special fees or funds instead of being paid out of the General Revenue Fund.N

It is thus clear that the fees from build- ing and loan associations under Article 881a-9, since they are available only the payment of expenditures in su- pervising building and loan associations, cannot be taken into consideration in determining the authority of the banking com- missioner to make expenditures in the supervision of one of the other of corporations. It is likewise clear that ex- penditures in the supervision of building

are limited to the fees from building and loan asso- ciations.

The general law does not set apart and dedicate to the payment of expenditures of credit unions from credit unions. However, the legislature has, set those fees apart for the purpose by the rider above quoted, of enforcing the credit union laws of this State by appropria- tion. It is therefore clear that such fees may not be taken consideration by the banking commissioner the au- thority to make expenditures in connection with the supervision However, neither the general of another class of corporations. law nor the appropriation bill indicates any intention on the part of the Legislature to limit the expenditures to be made in

the supervision of credit unions to the fees collected such credit unions. On the contrary, this was clearly not in- tended by the Legislature, it specifically

the credit unions should not be assessed any fee for services rendered in supervising them. We therefore hold that expendi- tures in the supervision of credit unions are not limited to the fees collected from that class of corporation, but that the fees collected from credit unions under the article of the statute above cited, may be used to measure only expenditures incurred in the supervision of credit unions.

Fees collected by the Banking Department from banks and loan and brokerage companies occupy a different status. So also do the receipts of the Banking Department otherwise than as examination fees or fees in lieu of examina- tion fees from the corporations under the supervision Banking Department. There is no dedication of the examination fees from banks and companies. On the contrary, the statute provides or contemplates that they shall be deposited in the General Revenue Fund. The examina- tion fees from banks and loan and brokerage companies are not impressed with a trust, to be used only for expenses of such companies. On the contrary, these charges merely represent a quid pro quo for services rendered, and when the corporation has made the payment required by law, it has no interest in the disposition made by the State of the monies thus collected. The injustice which you point out in your letter, that banks are thereby compelled to contribute to the cost of supervision of loan and brokerage companies, or vice versa, is more apparent than real. The law only permits the commissioner to levy such assessments as will compensate the State for the cost of examination. When the bank or loan and grokerage company has paid the cost of the examination, it has paid the cost of the service rendered by the State it. The fact that the money thus received by the State may be devoted by the State to other State purposes does not operate unfairly as to the bank or loan and brokerage company, for the cost of supervision of loan and brokerage companies has not been taken into consideration by the commis- sioner in determining the amount of the assessment to be paid by the bank, and vice versa.

\;e hold that the aggregate of the examination fees by the Commissioner from banks and from loan and and the aggregate of the receipts by the commissioner from charges other than those from examina- tion fees or fees in lieu of examination from all of the of corporations under the supervision of the Banking COP missioner, may be taken consideration

authority of the commissioner to make expenditures in connec- tion with the supervision of banks, loan and brokerage compan- ies, and credit unions. Thus the cost of supervising banks is not limited by the receipts from banks, the cost of supervising companies is hot limited to fees from loan and brokerage and the cost of supervising credit unions is not limited to fees credit unions.

Your second and third questions are, for convenience, considered together*

Your appropriation is found under the general heading, “State Banking Department”. The first division is merely styled “Salaries” . The second division is styled “Maintenance and Mis- cellaneous”. .The third division is styled “Building and Loan Divi sionn . The fourth division is styled “Loan and Brokerage Division” . Under the Loan and Brokerage heading we find items r;I;eddL7io,"" 8 Item 6 is for the sum of $200.00 per an- Item 7 of $19,000.- num for pr nt ng and*distributing law books; “Traveling expense, Banking Department” ; and Item 8 is $420.00 per annum for “Surety Bond Premiums”.

Referring to the appropriation made by the Legislature the Department of Banking for the fiscal biennium ending Aug- ust 31, 1939 we find the same general pattern followed. In that appropr f ation bill there was the heading under the general he ading, ‘I Department of Banking”, of “Salaries”. Then there ap- peared the heading called “Maintenance and Miscellaneous”. Un- der the subheading, f*Maintenance and Miscellaneoustl of that ap- propriation, there appeared Item 15 which was a lump sum appro- priation of fees from building

as an appropriation for expenses and salaries of the examiners and other employees and expenses necessary build- Item 16, a similar ing and loan associations. We find also lump sum appropriation relative to the supervision loan and companies; Item 17, an appropriation of all col- lected under the credit union law for the supervision of credit unions. Then, under that appropriation we find three items similar to those to which we have above referred as appearing in the appropriation the present biennium. These items are numbered 18, 19, and 20; Item 18 being in the sum of $300.00 per annum for printing and distributing law books; Item 19, the sum of $22,500.00 per annum for “Traveling Expenses of Commissioner, Employees and all authorized representatives of the Banking Departmen 4"j and Item 20, $450.00 per annum for “Surety Bond Pre- miums”.

,Although the position of an appropriation with respect to a particular heading may be of importance

intent of the Legislature is not conclusive. A greater sig- nificance must be attache b to the nature of the item.

X-ion. Lee Brady, page 6

In the appropriation for the preceding biennium, that Items 18 and 20 were intended

it is clear for the Bank- ing Department as such, not for a particular division thereof. >Je are of the opinion that the intent was the same with re- to Items 6 and 8 under the heading spect "Loan and Brokerage and so hold. Division", to Item 7, it appears on the face of

With respect the item itself it is for the "traveling expenses" of the "Banking Department". The term "Banking Department" obviously embraces more than one division of that department, so that, in the absence of other considerations affecting construction, the item :;,ould be construed as available for expenditure for all divisions. L substantially similar item was found in Item 19 of the appropriation for the preceding biennium. By virtue of the fact, however, th-At all expenses of supervising build- ing and loan associations, credit unions, and loan and broker- 3Ee companies were specifically for by separate items 01 aparoprintion, it was clear that th& item was intended only ?or traveling expenses incurred in supervising banks.

In this biennium we find an item of $5 000.00 separ- ately provided for traveling expenses of the building and we find a separate appropriation division for enforcing the Credit Union laws. Since an approi2riation not only pro- vides money for a particular purpose, but limits the expendi- that Item 7 is not ture that purpose, is clear intended to be a-J;iilable travelling expenses in supervis- ing building and credit unions. It is, however, available for all other traveling expenses "Banking Department" in toto, which include, of course, trav- eling expenses banks and loan and brokerage companies.

APPROVED AUG 27, 1940 Yours very truly /s/ Grover Sellers

First &ssistant Attorney General /ATTORNEY GENERAL OF TEXAS APPRO?ED: OPIMION COKMITTEE By /s/ R. W. Fairchild BWB, CIlAIRKAi'~ Richard W. Fairchild, BY:

Assistant RWF:jm:wb