January 7, 1970
Honorable Gene Russell Opinion No. M-549
County Attorney
Burnet County Re: Filling vacancies on the
Burnet, Texas board of directors of a
county hospital authority
created pursuant to the
provisions of Article 4494r,
Dear Mr. Russell: V.C.S.
Your request for an opinion on the above subject matter
poses the following question:
"Does the Commissioners' Court have the
right to appoint minority members so long as
the Authority exists, and does it have such a
right as to majority succession at such time
as the indebtedness is liquidated, or is the
Court's function merely to impart existence
to some or all of the directors where the
Trustee and the Board have not acted?"
The composition of the board of directors of a county
hospital authority created pursuant to the provisions of Article
4494r, Vernon's Civil Statutes, and the method of filling vacancies
on the board of directors is provided in Section 4 of Article
4494r, which reads as follows:
"Sec. 4. (a) The Authority .shall be governed
by a Board of Directors consisting of not less
than seven (7) nor more than eleven (11) members
to be determined at the time of creating the
Authority. Except as hereinafter in this Section
provided, the first Directors shall be appointed
by the Governing Body of the County, and they
shall serve until their successors are appointed
as hereinafter provided. When the Authority is-
sues its revenue bonds the resolution authorizing
the issuance of the bonds or the Trust Indenture
securing them may prescribe the method of selecting
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Hon. Gene Russell, page 2 (M-549)
and the term of office of a majority of the members
of the Board. The remaining members of the Board
shall be appointed by the Governing Body of the
County. The Trust Indenture may also provide
that, in event of default as defined in the Trust
Indenture, the Trustee may appoint all of the
Directors, in which event the terms of the
Directors then in office shall automatically
terminate. Unless and until provision is made
in the Bond Resolution or Indenture in connection
with the issuance of bonds for the appointment by
other means of part of the Directors, all of the
Directors shall be appointed by the Governing
Body of the County for terms not to exceed three
(3) years, but the terms of Directors appointed
prior to the issuance of the first issue of
revenue bonds shall be subject to the exercise
of the provision herein made for appointment of
a majority of the members of the Board in con-
nection with the issuance of the bonds. NO of-
ficer or employee of any such County shall be
eligible for appointment as a Director. Directors
shall not receive compensation for services but
shall be entitled to reimbursement of their ex-
penses incurred in performing such service.
"(b) In the event the Authority purchases
from a nonprofit corporation a hospital then in
existence or in process of consturction, the
first members of the Board of Directors and
their successors shall be determined as provided
in the contract of purchase."
Your request for an opinion.and the accompanying docu-
ments set forth the following facts:
On October 26, 1965, the Commissioners Courts of Burnet
County created the Burnet County Hospital Authority pursuant to
the provisions of Article 4494r, Vernon's Civil Statutes, and
provided that the Authority shall be governed by a Board of
Directors consisting of seven members. The Resolution passed
by the Commissioners Court appointed seven members to the Board
of Directors of the Authority and provided that the Directors
would serve for a term of three years unless other provisions
should be made.in a Bond Resolution. Five of the members of the
Board of Directors of the Authority were members of the Board of
Directors of Shepperd Memorial Hospital. On April 13, 1967,
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Hon. Gene Russell, page 3 (M-549)
the Board of Directors of Shepperd Memorial Hospital passed a
Resolution authorizing the sale of Shepperd Memorial Hospital
to the Authority. On December 11, 1967, the Commissioners Court
of Burnet County issued an Order amending its Order of October
26, 1965, changing the term of office of the members of the
Board of Directors of the Authority to a term of two years, from
October 26, 1967, and on the same date appointed the same members
for a term of,two years, from December 11, 1967. On October 1,
1967, the Authority authorized the issuance of bonds and executed
a Trust Indenture securing said bonds. Subsequently on December
28, 1967, the Authority passed a Resolution stating that a majority
of the Board of Directors of the Authority shall always be selected
by a majority of the Directors of such Authority.
In view of the foregoing facts it is our opinion that the
Board of Directors of the Burnet County Hospital Authority was
organized under Subdivision (a) of Section 4 of Article 4494r,
Vernon's Civil Statutes, rather than Subdivision (b), and it
issued bond and executed a Trust Indenture as provided in Sub-
division (a).
Section 12.06 of the Trust Indenture provided:
"In accordance with the Act, it is hereby pro-
vided that four members (being a majority) of the
Board of Directors of the Authority shall be
selected as herein provided. Such four members
shall be appointed for terms of two years each by
a majority vote of the Board of Directors, pro-
vided that the initial terms shall be for the
periods hereinafter specified. At the first
meeting of the Board of Directors following the
initial authentication and delivery of the Series
1967 Bonds, said Board of Directors shall by lot
determine which of their number shall be counted
among said four members. Also, at said meeting
following the selection of said four members, the
said four members shall by lot determine among
themselves which of their number will be in Class
I and which of their number shall be in Class II.
Each Class shall be composed of two.members.
Class I shall have terms of office expiring
October 26, 1968 and Class II shall have terms
of office expiring October 26, 1969. Thereafter
all of such four members shall have terms of of-
fice of two years duration."
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Hon. Gene Russell, page 4 (M-549)
Under this factual situation it is our opinion that Sub-
division (b) of Article 4494r is not applicable to the filling
of vacancies on the Board of Directors of the Burnet County
Hospital Authority. You are accordingly advised that vacancies
are to be filled in accordance with the.proaisions of Subdivision
~(a) of Article 4494r and Section 12.06 of the Trust Indenture
signed on October 1, 1967, and filed in the County Clerk's of-
fice on the 18th day of November, 1968. Therefore, the majority
of the members of the Board will be appointed by the Board of
Directors and the remaining members of the Board shall be ap-
pointed by the Commissioners Court of Burnet County.
SUMMARY
Under the facts submitted, vacancies oc-
curring on the Board of Directors of the Burnet
County Hospital Authority shall be filled in the
manner prescribed in Subdivision (a) of Section 4
of Article 4494r, Vernon's Civil Statutes, and the
Trust Indenture executed and filed pursuant there-
to, and a~ma-jority of the members will be appointed
by the Board of Directors and the remaining members
are to be appointed by the Commissioners Court of
Burnet County.
Prepared by John Reeves
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
Alfred Walker, Co-Chairman
Wayne Rodgers
Sam Kelley
Arthur Sandlin
MEADE F. GRIFFIN
Staff Legal Assistant
NOLA WHITE
First Assistant
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