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# TheAttorney General ofTexas

August 20, 1982 MARK WHITE Attorney General

Supreme Court Building P.0. BOX 12546 Austin. TX. 76711- 2546 5121475-2501 Telex 9101674-1367 Telecopier 512/475-0266

1607 Main St., Suite 1400 Dallas. TX. 75201-4709 2141742-6944

4624 Alberta Ave.. Suite 160 E, Paso, TX. 79905.2793 9151533.3464

1220 Dallas Ave., Suite 202 tiouston, TX. 77002-6986 7131650-0666

606 6,oadw.w Suite 312 Lubbock. TX. 79401.3479 8061747-5238

4309 N.Tenth, Suite 6 bkA,len, TX. 78501-1665 5121662-4647

200 Main Plaza. Suite 400 San Antonio, TX. 762052797 512/225-4191

An Equal opportunityi Affirmative Action Employer Honorable JamesA.Gray Burleson CountyAttorney Caldwell, Texas 77836 Opinion No. ML'-505
Re: Selection of county depository owned by holding company inwhich county judge owns stock
DearMr. Gray:
You askwhether abank is disqualified from serving as a county depository where the county judge is an officer and director of the bank and owns less than 1%of theissued and outstanding shares of the bank's capital stock. You also ask if the same bank would be disqualified from serving as county depository where the county judge is an officer and director of the holding company which recently acquired the bank. The judge owns 17% of the capital stock of the holding company. Article 2529c, V.T.C.S., governs the issues raised by your opinion request,,and itprovides, inpertinent part:

A bank shall not be disqualified from bidding and becoming the depository for any agency or political subdivision of the state by reasm of having one or more officers, directors or stockholders of said bank who individually or collectively own orhave abeneficial interest in notmore than 10percent of thebank's outstanding capital stock, and at the same time serves as a member of the board, commission, or other body charged by law with the duty of selecting the depository of such state agency or political subdivision; provided, however, that said bank must be selected as the depository by a majority vote of themembers of the board, commission, or otherbody of suchagency orpolitical subdivision and no member thereof who is an officer, director or stockholder of the bank shall vote or participate in theproceedings.

p. 1819I I

Honorable JamesA.Gray -Page 2 (Mw-505)

V.T.C.S. art. 2529c, 52. Attorney General Opinion H-596 (1975) is dispositive of your first inquiry. Therein, we determined that, in accordance with article 2529c, section 2,V.T.C.S., abank could serve as county depository where the county judge owned stock in the bank and served on the board of directors if the members of the commissioners court didnot collectively ownmore than 10%of thebank stock and interested members did not participate in the vote. YOU have not stated whether any other member of the commissioners court owns or has a beneficial interest in the stock of the bank in question. Assuming that the county judge is the only member of the commissioners courtwith an interest in thebank stock, his ownership of less than 1% of the outstanding capital stock clearly would not serve to disqualify the bank so long as the county judge does not participate in the selection process. If other members of the commissioners court also have an interest in thebank stock, thebank would not be disqualified unless the collective interest of the members exceeds 10%.
Your inquiry regarding the county judge's ownership of 17%of the outstanding capital stock of the bank holding company is not susceptible to a definite answer. If the bank holding company is a one-bank holding company where the bank is the corporation's sole asset, the likelihood is that the county judge thenhas a "beneficial interest" inmore than 10%of thebank's outstanding stock. Insuch a case, thebank would clearly be disqualified from serving asa county depository. If the bank holding company is a multi-bank holding company, the judge's beneficial interest would have tobe determined onan individual basis.
SUMMARY

A bank is not disqualified from serving as a county depository where an officer, director, and 1%shareholder of thebank isthecounty judge, so long as the county judge does not participate in the voting on the selection of the county depository and his interest in the bank stock combined with that of any other members of the commissioners court doesnot exceed 10%. Thebank may be disqualified by virtue of the county judge's ownership of 17% of the outstanding capital stock of the bank holding company, depending upon the judge's resulting "beneficial interest" in thebank stock.

MARK WHITE Attorney General ofTexas

p. 1820Honorable JamesA.Gray -Page 3 (MW-505)

JOHNW. FAINTER, JR. FirstAssistant Attorney General
RICHARD E.GRAY III Executive Assistant Attorney General Prepared byCatherine B. Fryer Assistant Attorney General
APPROVED: OPINION COMMITTEE
SusanL.Garrison. Chairman JonBible Catherine B.Fryer Rick Gilpin Patricia Hino-josa JimMoellinger BruceYoungblood

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