Untitled Texas Attorney General Opinion

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