The Attorney General of Texas
May 5, 1983
JIM MATTOX
Attorney General
Honorable Warren New Opinion No. JM-29
Supreme Court Building
I’ 0. Box 12546
Yoakum County Attorney
Austin. TX. 76711. 2546 P. 0. Box 359 Re: Whether article 2529c,
5121475-2501 Plains, Texas 79355 V.T.C.S., authorizes a city to
Telex 910/8741367 contract with a depository bank
Telecopier 5121475-0266 when a majority of the city
COUIlCil members are stock-
1607 Main St., Suite 1400 holders in the bank
Dallas, TX. 75201.4709
2141742-6944 Dear Mr. New:
4624 Alberta Ave.. Suite 160
You ask whether the city council of a general law city is
El Paso, TX. 799052793 prohibited from entering into a depository contract with a bank when a
915/533-3464 majority of the city council members are stockholders in that
depository bank. We conclude that, in the situation you describe, the
,-
city council of a general law city is prohibited from entering into
10 Dallas Ave.. Suite 202
Housfon. TX. 77002-6966
such a contract.
713/650-0666
You suggest that, by entering into the contract, the city council
has violated articles 2529c and 988, V.T.C.S., as well as section
606 Broadway, Suite 312 39.01 of the Penal Code. Article 2529c, V.T.C.S., governs the
Lubbock. TX. 79401-3479
selection and qualification of depositories of state agencies and
6061747-5236
political subdivisions; it will be discussed later. Section 39.01 of
the Penal Code provides that a public servant commits an offense if he
4309 N. Tenth, Suite 6 knowingly or intentionally engages in official misconduct. Because a
McA,,en. TX. 76501-1685 determination of whether section 39.01 has been violated in this
5121682-4547
instance necessarily requires the resolution of disputed matters of
fact, we will not address that issue in this opinion.
200 Main Plaza. Suite 400
San Antonio, TX. 76205.2797 Article 2529c, V.T.C.S., governs the selection and qualification
5121225-4191 of depositories of state agencies and political subdivisions and
provides at section 2 the following in pertinent part:
An Equal Opportunity/
Affirmative Action Employer A bank shall not be disqualified from bidding
and becoming the depository for any agency or
political subdivision of the state by reason of
having one or more officers, directors or stock-
holders of said bank who individually or collecti-
vely own or have a beneficial interest in not more
than 10 percent of the bank's outstanding capital
stock, and at the same time serves as a member of
the board, commission, or other body charged by
law with the duty of selecting the depository of
such state agency or political subdivision;
p. 126
Honorable Warren New - Page 2 (JM-29)
provided, however, that said bank must be selected
as the depository by a majority vote of the
members of the board, commission, or other body of
such agency or political subdivision and no member
thereof who is an officer, director or stockholder
of the bank shall vote or participate in the
proceedings. (Emphasis added).
The statute requires that a depository bank be selected by the
vote of a majority of board members. All stockholders in a bank are
disqualified from voting in favor of it. On the facts you present, a
majority of the council members were disqualified from voting to
choose as depository the bank in which they owned stock. Thus, the
action taken by the city council members is manifestly in violation of
the statute.
We therefore conclude that the city council of a general law city
is prohibited by article 2529c, V.T.C.S., from entering into a
depository contract with a bank when a majority of the city council
members are stockholders in that bank.
SUMMARY
The city council of a general law city is
prohibited by article 2529c, V.T.C.S., from
entering into a depository contract with a bank
when a majority of the city council members are
stockholders in that bank.
JIM MATTOX
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Jim Moellinger
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Jim Moellinger
Charmaine Rhodes
Nancy Sutton
p. 127