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E
IFTEXAS
AGSTIN. TEXAS 78711
September 10, 1970
Honorable Bruce Gibson
Commissioner Opinion No. M-688
Credit Union Department
900 Congress Avenue Re: Questions relative to
Austin, Texas 78701 whether the duties set
forth in Article 2461,
Sec. 12(b), (17), Ver-
non's Civil Statutes,
are mandatory or per-
missive.
Dear Mr. Gibson:
Reference is made to your letter in which you request
an opinion from this office as to the captioned matter. We
quote from your letter, in part, as follows:
"Following the recodificationof the
Credit Union Laws of Texas which became
effectiveMay 13, 1969, various Credit Unions
under this Department'ssupervisionhave
expressed concern as to the legal intent
of a particular duty of the B,oardof Direc-
tors of their Credit Unions.
You then request our opinion to the following questions:
(1) Is the duty set out under Articles
2461-12(b) and 2461-17, V. C. S.,
permissive or mandatory? This is
a new provision in the current Act
and, if mandatory, could result in
a distinct hardship on many of the
smaller credit unions.
(2) ;f,;Fe answer to (1) above is 'permis-
then are any of the subsections
of Article 2461-12(b) also permissive?
(3) If the answer to (1) above is 'mandatory'
then are any of the subsectionsof Article
2461-12(b) also mandatory?
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Honorable Bruce Gibson, Page 2, (M-688)
It is noted that Article 2461-12, Vernon's Civil Statutes,
the Credit Union Act, pertains to the board of directors of credit
union organizations. It is comprised of two subsections,with sub-
section (a) providing as follows:
"The board of directors shall have the
general direction of the affairs, funds, and
records of the Credit Union and shall meet as
often as nece,ssary,but not less than once each
month."
Subsection (b) provides:
"It shall be the special duty of the
directors to:. . .'
Following this introductorylanguage are the enumerated special
duties of the board of directors,nineteen in number. Your
questions as heretofore quoted relate to these nineteen special
duties of the board of directors and can be thusly stated: Are
these nineteen special duties of the board of directors as enumer-
ated in Article 2461-12(b)mandatory or permissive?
"There is no universal rule or absolute
test by which directory provisions in a statute
may in all circumstancesbe distinguishedfrom
those which are mandatory. However, in the
determinationof this question, as of every other
question of statutory construction,the prime
object is to ascertain the legislativeintent."
82 c,J.s. 869, Statutes, Section 376.
The crucial test necessarily requires the proper construc-
tion of the phrase9 "It shall be the special duty," and more speci-
fically, the word "shall."
The Supreme Court of Texas, in the case of Chisholm v.
Bewle Mills, 287 S.W. 2d 943, (Tex. Sup. 1956), observed the
owing w en confrontedwith our particular question.
357+-E
"There is no absolute test by which it
may be determinedwhether a statutoryprovision
is mandatory or directory. The fundamental
rule is to ascertain and give effect to the
legislativeintent. Although the word 'shall'
is generally construed to be mandatory, it may
be and frequently fs held to be merely dfrec-
tory. In determiningwhether the Legislature
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Honorable Bruce Gibson, Page 3, (M-688)
intended the particularprovision to be manda-
tory or merely directory, considerationshould
be given to the entire act, its nature and ob-
ject, and the consequencesthat would follow
from each construction. Provisionswhich are
not of the essence of the thing to be done, but
which are included for the purpose of promoting
the proper, orderly and prompt conduct of busi-
ness, are not generally regarded as mandatory."
Applying this fundamentalrule as laid down by the Supreme
Court of Texas to the nineteen special duties of Article 2461-12(b),
we reach the following conclusions: Article 2461-12(b), Subsections
G&Q ~~)l;la;~~co$;)I (a), (lo), (12) ana (13) are deemed by this
Article 2461-12(b), Subsections
(6), (7), (9), (ll), (l~;%~:s~16~, (17b, (18) and (19) appear
to be permissive or directoryprovis ens, ut could be considered
mandatory under some particular facts and circumstances.
The mandatory provisions read, in part, as follows:
”(1) act upon applicationsfor membership. . .
”(2) purchase a blanket fidelity bond. . .
“(3) determine from time to time the rate(s)
of interest which shall be charged on loans. . .
” (4) declare dividends (if any) in the w and
manner as provided by the bZaiK . .-
(parenthesisours)
” (5) determine the rate(s) of interest to be
paid on deposits. . .
11(a) fix from time to time the maximum amount. . .
which may be loaned to any member. . .
“(10) authorize the employmentand compensation
of such person. . .as may be necessary to
carry on the business of the credit union;
"(12) authorize the borrowing or lending of money
to carry on the functions of the credit unions;
” (13) designate a depository or depositoriesfor
the funds of the credit union."
The permissive or directory provisions involving the
exercise of judgment or discretion under the factual situation
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Honorable Bruce Gibson, Page 4, (M- 688)
presented read.,in part, as follows:
”(6) limit the number of shares which may
be owned by a member. . .
"(7) fill vacancies occurring between annual
meetings on a board of directors, credit
committee, and audit committee. . .
”(9) authorize the investmentof funds of the
credit union. . .
"(11) authorize the conveyance of property;
"(14) upon two-thirds approval, the board of
directors may replace any or all members
of the audit committee for failure to
perform their duties until the next
members' meeting. . .
"(15) authorize and provide for the compensation
of auditing assistance requested by the
audit committee;
"(16) suspend from his official position any
officer or director who fails to attend
regular meetings. . .or who otherwise
fails to perform any of the duties re-
quired of him as an official;
"(17) appoint from its own number an executive
committee to exercise such authority as
may be delegated to it by the board of
directors between meetings of the board
of directors;
yla) perform or authorize any action consistent
with this Act not specificallyreserved. . .
for the members, and perform such other
duties as the members may time to time
require;
” (19) appoint any committees deemed necessary. . .'
Considering the purpose of each mandatory provision, it
is our opinion these words when read with the prefatory language
of the Article, "It shall be the special duty of the directors to",
are an indication the Legislaturemeant such d ti fth B cl
of Directors to be of an imperative nature. P%szkg to the';&-
guage of Chisholm v. Bewley Mills, supra, these provisions are of
the essence of the thing to be done.
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Honorable Bruce Gibson,,Page5, (M- 688)
The permissive or directoryprovisions, i.e., Article
2461-12(b , subsections (6), (7), (g), (lo), (ll), (12), (14)
(s), (16 I, (17), (18) ana (19) reflect a legislativeintent
to confer upon the board of directors a measure of discretion
as to when, where.and how such authority should be exercised;
and depending upon the particular facts presented they % be
considered either permissive or mandatory. See Chisholm v.
Be;le; M;l;s, supra. Also, the case of Prosper Independent
SC oo D s rict v. Collin County School Trustees, 51 w 2
(Tex. Civ. App. 1932 ff c A 9 s w 2d ;j;sh:uld
be noted as to the follokzg ~bs~%at%~ l*
If
.Generally,the lodging of author-
. ,.
ity in any designatedboard or form carries
with it the right of such board or form to
determine whether a proper case has arisen
for the exercise of such power. . .'
%~Itis,noted that while in this case a writ of error was
granted and the judgment of the Court of Civil Appeals was affirmed,
the opinion did not discuss the point under consideration.
It is important to observe that a statutoryprovision may
be permissive as to some matters and mandatory as to others, as
pointed out in 50 American Jurisprudence39, Statutes, Section 18:
"There are even provisions which have
been regarded as mandatory when involved in
some proceedings, and directory when involved
in others, or mandatory under some circumstances
and directory under other circumstances."
Since we have been presented no facts or'circumstences,
our opinion cannot be construed as determiningthe proper charac-
terization of the statutoryprovisions under any and all circum-
stances or as applied to the facts of a particular case. The
question of the constructionof statutory provisions as they may
involved the "protection of third persons" must sometimes be
considered;also, whether any "substantialrights depend on com-
pliance with the particular provisions and no injury can result
from ignoring them," and whether "the legislative intent can be
accomplishedin a manner other thanthat prescribed with substan-
tially the same results." Such factors are sometimes a necessary
part of statutory constructionand must begapplied to the facts
See State v. Frisby, lo8 N.W. 2d 769, 773
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Honorable Bruce Gibson, Page 6, (N- 688)
mandatory provisions on the board of directors
of credit union organizations.
Article 2461-12 b), Subsections (6 ,
(1 4 1, (16), (17)s (18
of the above Act, depending
upon‘?%-facts presented may be mandatory or-
permissive provisions on the board of direc-
tors of credit union organizations.
3) A characterizationcannot be made under
all facts and circumstances,and the facts and
circumstanceswill sometlmes be determinativeof
a particular statutory cons ruction.
A
s very truly,
ey General of Texas
Prepared by Ray McGregor
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Jim Swearingen
James Quick
Jack Goodman
Jack Sparks
MEADE F. GRIFFIN
Staff Legal Assistant
AIFREDWAXER
Executive Assistant
NOLA WHITE
First Assistant
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