The Attorney General of Texas
t+nmber 14, 1980
MARK WHITE
Attorney General
Honorable Kenneth Ii. Ashworth Opinion No. H-272
Coordinatiq Board
Texas College & UniversitySystem Re: Whether a commtmitycollege
P. 0. Box 12788, Capitol Station may deposit ftmds in a aav@s and
Austin, Texas 787R loan institution when a member of
the board of trustees is a stock
holder, officer, director OF
employee of the savhgs & loan.
Dear Mr. Ashworth:
Ycu have requested our opinion as to whether a commtmity college
district may depceit ftmds in a savings and loan ‘association if a member of
the district’s board of trustees is a stockholder, offioer, director (r
employee of the saviqs and loan.
Section 130.084 of the Education Code provides that the board of
trustees of a community college district is to be governed:
. . .by the general law governing the establishment,
management wd control of independent school
districts insofar as the general law is applicable,
Section 23.74 of the Education Code requires that a Qchool
depository” shall be a bank located in the State of Texas. In a series of
opinions from this off&-it bus been determined that savirgs and loan
associations do mt qualify as depositories for politicel s~divisicns without
statutory authorization. See Attorney General Opinions H-1013fl977); H-
723 (1975X M-22 0967). -
/
A”Equaloppaiunily, Specifically, the statutory terms %ank, bankirg corporation,
1 A”iml.,iW Employer association cr indivi&al banker” have been determined not to include
ARion
savirgs and loan associations. It would seem clear that the ssme rationale
! applies to the section 23.74 requirement that a school depository must be a
bank.
I The caption to Senate Bill 1195,Acts 1979, 66th Legislature, chapter
829, at 2167,indicates that the hsgislature bs &awn a clear distinction
between the placirg of school funds in a “depository” and the “investment”
of such funds. Since using a savings and loan association as a depository is
p. 805
Honorable Kenneth H. Ashworth - Page Two (W-272)
not authorized, the question remains whether the placement of funds within a savings
and loan is a proper investment, rather than depaait, of college frnda
Section 23.80 of the Education Code, amended in l979, provides:
The school district shall have the right to provide in its bid
blank for the ri@ to place cn time deposits with savings and
loan institutions located within the State of Texas on ftmds
that are fully insured by the Federal Savitgs and Loan2 urance
Corporation, but no district may place cn deposit with any
savirgs and loan institution any bond or certificate of indebted-
ness proceeds as provided by section 20.42 of this code. The
school district is entitled to invest any and all of its funds in
direct debt securities of the United States of America or other
types of bonds, securities, warrants, etc., which the district is
authorized by law to invest in. No depository bank selected
under this subchapter may be compellea without its consent to
accept on tim,e deposit any bond proceeds mulersection 20.42 of
this code, but a depository shall be permitted to offer a bid of
interest equaliig the highest bid of Interest for the time deposit
of the bend proceeds tendered by another bank. If the
depository bank equals the bid, it is entitled to receive the band
proceeds on time deposit.
(Emphasis addedh In our opinion, this statute &es not furnish affirmative authority
for the investment of funds in a savings and lean association. Whereas a district “is
entitled to Invest . . in direct debt securities of the United States. . . or other types
of bards, securities, warrants, etc., ” the only authority conferred by section 23.80 with
regard to saviqs and loan institutions is the reservation of a right of investment in
such institutions vis a vis the district’s depaPitory bank. We believe that this provision
should be construed as enticipatory legislation, to the effect that, if the legislature
stisequently permits Investments in aavws and loan associaticns, a district will be
protected against an allegation by its depository bank that such investments
unconstitutionally impair the obligation of contracts. E Attorney General Opinion
H-723 (l975L
The history of state depository laws indicates that the legislative Intent would
not be properly applied lq construction of section 23.80 to allow ftmds to be placed
within a savings and loan association as investments rather than deposits. In Lawson v.
Baker,220 S.W. 260,269 (Tex. Civ. App. - Austin 1920,no writ) the court noted that:
. . .the general deposit& of money in a bank or depository,
with or without interest, stiject to the check op demand of the
depositor, is not a losn cr investment. The basis of distinction
recognized in these cases is that a loan is for the benefit of the
borrower, and cannot be withdrawn until the same becomes due,
at the time fixed in the contract, which is usually some time
p. 866
,
Honorable Kenneth H. Ashworth - Page TIrea (H-272)
certain. On the other hand, a deposit is for tha benefit of the
depceitor primarily, and, while it is true that the relation of
debtor and creditor results, it is not necessarily a loan, If the
money is to remain.on depceit fa a fixed period, dum which
time the depceitor has ID right to Qmand the return of the
money, the transaction may be regarded as in all stistantial
respects a loan, but if the deposit is not for a time certain, but
the money must be returned lpce demand of the depceitor, the
transaction amnot, in any ploper sense, be regarded as a loan.
This view is strengthened by the legislative history of section 23.80. The
committee indicated that the following were lqally permissible investments by a
school district: water district bonds, mroricipalbonds, school bends, city and county
bonds, treasury notes and all federal paper guaranteedby the federal government. No
reference was made to investments in a saviqs and loan association. In our opinion,
then, section 23.80 does not directly authorize a commtmity college district to invest
its funds in any sav@s and loan association, regardless of whether a member of the
district% baard of trustees is or is not a stockholder, officer, director or employee of
the savirrgsand loan.
SUMMARY
A community college district is not authorized to invest its
funds in any savings and lean association, regardless of whether
a member of the districtg board of trustees is or is not a
stockholder, officer, director op employee of the savixs and
loan.
x4
MARK WHITE
Attorney General of Texas
JOHN W. PAINTER,JR.
First Assistant Attorney General
Prepared by Rick Gilpin & Mitch Winnick
Assistant Attorneys General
p. 867
Hononrble Kenneth H. A&worth - Pege Pour (M-272)
APPROVED:
OPINIONCOWMIITEE
C. Robert Heath,Cldrman
Jon Bible
Rick Gilpin
Tom Pollen
Mitch Winnick
Bruce Youngblood
p. 868
Untitled Texas Attorney General Opinion
Combined Opinion