. 1 , 

E 

IFTEXAS 

AGSTIN. TEXAS 78711 

September 10, 1970 

Honorable Bruce Gibson 

Commissioner 

Credit Union Department 

900 Congress Avenue 

Austin, Texas 78701 

Dear Mr. Gibson: 

Opinion No. M-688 

Re: Questions relative to 

whether the duties set 

forth in Article 2461, 

Sec. 12(b), (17), Vernon's Civil Statutes, 

are mandatory or permissive. 

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 recodification of the 

Credit Union Laws of Texas which became 

effective May 13, 1969, various Credit Unions 

under this Department's supervision have 

expressed concern as to the legal intent 

of a particular duty of the B,oard of Directors of their Credit Unions. 

You then request our opinion to the following questions: 

(1) 

(2) 

(3) 

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. 

;f,;Fe answer to (1) above is 'permisthen are any of the subsections 

of Article 2461-12(b) also permissive? 

If the answer to (1) above is 'mandatory' 

then are any of the subsections of Article 

2461-12(b) also mandatory? 

-3309- 
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 subsection (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 introductory language 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 enumerated 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 circumstances be distinguished from 

those which are mandatory. However, in the 

determination of this question, as of every other 

question of statutory construction, the prime 

object is to ascertain the legislative intent." 

82 c,J.s. 869, Statutes, Section 376. 

The crucial test necessarily requires the proper construction of the phrase9 "It shall be the special duty," and more specifically, the word "shall." 

The Supreme Court of Texas, in the case of Chisholm v. 

357+-E 

Bewle Mills, 287 S.W. 2d 943, (Tex. Sup. 1956), observed the 

owing w en confronted with our particular question. 

"There is no absolute test by which it 

may be determined whether a statutory provision 

is mandatory or directory. The fundamental 

rule is to ascertain and give effect to the 

legislative intent. Although the word 'shall' 

is generally construed to be mandatory, it may 

be and frequently fs held to be merely dfrectory. In determining whether the Legislature 

-3310- 
Honorable Bruce Gibson, Page 3, (M-688) 

intended the particular provision to be mandatory or merely directory, consideration should 

be given to the entire act, its nature and object, and the consequences that would follow 

from each construction. Provisions which 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 business, are not generally regarded as mandatory." 

Applying this fundamental rule 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 directory provis ens, ut could be considered 

mandatory under some particular facts and circumstances. 

The mandatory provisions read, in part, as follows: 

” (1) act upon applications for membership. . . 

” (2) 

“(3) 

” (4) 

” (5) 

11(a) 

“(10) 

"(12) 

” (13) 

purchase a blanket fidelity bond. . . 

determine from time to time the rate(s) 

of interest which shall be charged on loans. . . 

declare dividends (if any) in the w and 

manner as provided by the bZaiK . . - 

(parenthesis ours) 

determine the rate(s) of interest to be 

paid on deposits. . . 

fix from time to time the maximum amount. . . 

which may be loaned to any member. . . 

authorize the employment and compensation 

of such person. . .as may be necessary to 

carry on the business of the credit union; 

authorize the borrowing or lending of money 

to carry on the functions of the credit unions; 

designate a depository or depositories for 

the funds of the credit union." 

The permissive or directory provisions involving the 

exercise of judgment or discretion under the factual situation 

-3311- 
Honorable Bruce Gibson, Page 4, (M- 688) 

presented read., in part, as follows: 

” (6) 

"(7) 

” (9) 

"(11) 

"(14) 

"(15) 

"(16) 

"(17) 

yla) 

” (19) 

limit the number of shares which may 

be owned by a member. . . 

fill vacancies occurring between annual 

meetings on a board of directors, credit 

committee, and audit committee. . . 

authorize the investment of funds of the 

credit union. . . 

authorize the conveyance of property; 

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. . . 

authorize and provide for the compensation 

of auditing assistance requested by the 

audit committee; 

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 required of him as an official; 

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; 

perform or authorize any action consistent 

with this Act not specifically reserved. . . 

for the members, and perform such other 

duties as the members may time to time 

require; 

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 Legislature meant 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. 

-3312- 
. . 

Honorable Bruce Gibson,,Page 5, (M- 688) 

The permissive or directory provisions, i.e., Article 

2461-12(b , subsections (6), (7), (g), (lo), (ll), (12), (14) 

(s), (16 I , (17), (18) ana (19) reflect a legislative intent 

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 

be noted as to the follokzg ~bs~%at%~ 

9 s w 

* l 

2d ;j;sh:uld 

If 

. ,. .Generally, the lodging of authority in any designated board 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. . .' 

%~It is, 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 statutory provision may 

be permissive as to some matters and mandatory as to others, as 

pointed out in 50 American Jurisprudence 39, 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 determining the proper characterization of the statutory provisions under any and all circumstances or as applied to the facts of a particular case. The 

question of the construction of statutory provisions as they may 

involved the "protection of third persons" must sometimes be 

considered; also, whether any "substantial rights depend on compliance with the particular provisions and no injury can result 

from ignoring them," and whether "the legislative intent can be 

accomplished in a manner other thanthat prescribed with substantially the same results." Such factors are sometimes a necessary 

part of statutory construction and must beg applied to the facts 

See State v. Frisby, lo8 N.W. 2d 769, 773 

-3313- 
._ ._ 

Honorable Bruce Gibson, Page 6, (N- 688) 

mandatory provisions on the board of directors 

of credit union organizations. 

Article 2461-12 b), 

4 

Subsections 

(1 1, (16), (17)s 

(6 

(18 

, 

of the above Act, depending 

upon‘?%-facts presented may be mandatory orpermissive provisions on the board of directors of credit union organizations. 

3) A characterization cannot be made under 

all facts and circumstances, and the facts and 

circumstances will sometlmes be determinative of 

a particular statutory cons 

A 

ruction. 

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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