I
P
Honorable Carl Parker Opinion No. ~~-1082
Chairman
Education Committee Re: Whether the board of trustees
Texas State Senate of a school district may enter
'P. 0. Box 12069 into a loan contract with its
Austin, Texas 78711 depository bank if a trustee is a
bank employee (reconsideration of
Attorney General Opinion JM-583
(1986)) (RQ-1658)
Dear Senator Parker:
You ask whether the board of trustees of a school
district may enter into a loan contract with its depository
bank, and take subsequent action concerning the loan, if a
board member is employed by the bank. Attorney General
Opinion JM-583 (1986), in addressing a similar guestion,
implied that such loan contracts were barred by the common
law conflict of interest doctrine, which invalidates any
contract between a governmental body and another entity if a
member of the governmental body has a direct or indirect
pecuniary interest in it. Attorney General Opinion JM-583
at 4, 7 (1986); see Mevers v. Walker, 276 S.W. 305 (Tex.
Civ. APP. - Eastland 1925, no writ): Attorney General
Opinions JM-424 (1986); H-916 (1976). However, Attorney
General Opinion JM-583 did not consider whether chapter 171
of the Local Government Code applied to such loan transac-
tions. Your question requires us to reconsider the
implication in Attorney General Opinion JM-583 that common
law conflict of interest rules govern a school district's
loan contract with its depository bank.
Our prior opinion dealt with section 23.75 of the
Education Code, which modifies the common law by allowing a
school district to enter into a depository contract with a
bank in which a trustee is financially interested as a
stockholder, officer, director, or employee. We concluded
that section 23.75 was a special statute applicable to
school district depository contracts and that it excepted
such contracts from chapter 171 of the Local Government
Code, a general provision regulating conflicts of interest
of local public officials as a class. Thus, a school
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Honorable Carl Parker - Page 2 (JM-1082)
trustee who has an interest in a depository bank as defined
by section 23.75 may participate in decisions about the
depository contract, without filing an affidavit stating his
interest or recusing himself from participation in decisions
about the depository contract in accordance with chapter 171
of the Local Government Code. We reaffirm this holding,
which is limited to matters affecting the depository
contract.
Attorney General Opinion JM-583 also discussed a second
issue concerning section 23.75 of the Education Code. We
concluded that section 23.75 did not permit a school
district to borrow money from its depository bank if a
trustee was a stockholder, officer, director, or employee of
that bank, because there was a substantial difference
between borrowing public funds from a depository bank and
depositing funds in it. A prior opinion that did not make
this distinction was overruled. See Attorney General
Opinion M-331 (1969) (overruled by Attorney General Opinion
JM-583); see'also Attorney General Opinion H-649 (1975)
(questioning Attorney General Opinion M-331).
~Attorney General Opinion J&583 ended with the con-
clusion that section 23.75 of the Education Code did not
remove common-law prohibitions against loan transactions
between a school district and its depository if a school
trustee was also a stockholder, officer, director, or
employee of the depository bank. The opinion does not
expressly state that the common law barred such loan
transactions, but it certainly implies this result.
On reexamining Attorney General Opinion JM-583, we
realize that our discussion of the second issue was
incomplete. We correctly determined that section 23.75 of
the Education Code did not exempt loan transactions between
a school district and its depository from common-law
restrictions, but we also should have considered whether
chapter 171 of the Local Government Code changed the law
applicable to such loans. Chapter 171 modifies the common
law conflict of interest doctrines applicable to all local
officials and all kinds of transactions, while section 23.75
modifies the common law for school depository contracts
only. See Acts 1987, 70th Leg., ch. 362, 5 6, at 1800
(amendiFV.T.C.S. art. 988b, § 6, now codified as Local
Gov't Code 5 171.007). When two statutes deal with~the same
subject, one in general terms and the other in a more
detailed way, they should be harmonized if possible. Culver
v. Miears, 220 S.W.2d 200 (Tex. Civ. App. - Eastland 1949,
writ ref'd).
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Honorable Carl Parker - Page 3 (JM-1082)
I .
School board members are "local public officials"
subject to chapter 171 of the Local Government Code. Local
Gov't Code 0 171.001(l); Attorney General Opinion JM-379
(1985). Banks and other lending institutions are "business
entities" within chapter 171. Attorney General Opinions
JM-379 (1985); JM-178 (1984). In our opinion, chapter 171
of the Local Government Code applies to loan transactions
between a school board and its depository bank. Thus, a
school board is not barred by common law conflict of
interest rules from entering into a loan contract with
its depository bank when a board member is pecuniarily
interested in the contract. A school board member with a
"substantial interest" in the depository bank, Local Gov't
Code .Q 171.002, must file an affidavit stating his interest
and must abstain from participating in decisions on loan
contracts with the depository if "action on the matter will
have a special economic effect on the [bank] . . . that is
distinguishable from the effect on the public." Acts 1987,
70th Leg., ch. 362, § 4, at 1799 (amending V.T.C.S. art.
988b, § 4, now codified as Local Gov't Code 5 171.004).
Attorney General Opinion JM-583 (1986) is modified in
accordance with this opinion.
SUMMARY
Chapter 171 of the Local Government Code
applies to loan contracts between a school
board and its depository bank if a school
board member has a substantial interest in
the bank. Section 23.75 of the Education
Code applies to a depository contract between
a school board and its depository bank in
cases where a school board member is a stock-
holder, officer, director, or employee of the
bank. Attorney General Opinion JM-583 (1986)
is modified in accordance with this opinion.
JIM MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
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MU MCCREARY
Executive Assistant Attorney General
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Honorable Carl Parker - Page 4 (~~-1082)
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Susan L. Garrison
Assistant Attorney General
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Untitled Texas Attorney General Opinion
Combined Opinion