OFFICE OF THE ArronNEv GF.NER.u STATE OF TEXAS

JOHN CORNYN

June 3, 1999
The Honorable Michael P. Fleming Harris County Attorney 1001 Preston, Suite 634 Houston, Texas 77002-1891 Opinion No. JC-0062 Re: Whether interest on aprosecutor’s hot-check fund may be severed from the principal and accrue to the county’s general fund (RQ-1054)
Dear Mr. Fleming: You ask whether the interest earned on aprosecutor’s hot-check fund, established under article 102.007(f) ofthe Code ofCriminal Procedure, may be severed from the hot-check fund and added to the county’s general revenue fund. Because section 113.021(c) ofthe Local Government Code severs the interest from statutory special funds belonging to the county, we conclude that interest on aprosecutor’s hot-check fund must be severed and applied to the benefit of the county as awhole. We thus concur with Attorney General Opinion JM-632 (1987). Aprosecutor may establish ahot-check fund in accordance with article 102.007 ofthe Code of Criminal Procedure. Under article 102.007(a), aprosecutor may impose afee for collecting and processing abad check. See also TEX.BUS. &COM. CODE ANN.53.108(a) (Vernon Supp. 1999) (defining order “payable on demand”); TEX.CODECRIM. PROC. ANN.art. 102.007(c) (Vernon Supp. 1999) (setting maximum fee). The prosecutor must deposit the fees into a special fund, the “hotcheck fund,” in the county treasury:

Fees collected under Subsection (c) of this article shall be deposited in the county treasury in a special fund to be administered by the county attorney, district attorney, or criminal district attorney. Expenditures from this fund shall be at the sole discretion of the attorney and may be used only to defray the salaries and expenses ofthe prosecutor’s office, but inno event may the county attorney, district attorney, or criminal district attorney supplement his or her own salary from this fund. 

### Id.art. 102.007(f). Article 102.007 does not instruct the county treasurer how tohandle interest that accrues on ahot-check fund. Under the common law, interest follows principal, or, more picturesquely, “‘[IInterest shall follow the principal, as the shadow the body.“’ 

### Phillips Y. Washington Legal Found., 118 S. Ct. 1925,193O (1998) (quoting 

### Beckjkd v.Tobin, 1Ves. Sen. 308,310,27 Eng. Rep. 1049, 1051 (Ch. 1749)). Texas courts follow this rule. See Sellers Y.

### Harris County, 483 S.W.2d 242, 243 (Tex.The Honorable Michael P. Fleming - Page 2 (X-0062)

1972); 

### Lawson Y.Baker, 220 S.W. 260, 272 (Tex. Civ. App.-Austin 1920, writ refd); 

### accord Phillips, 118 S.Ct. at 1930-3 1. As the Texas Supreme 

### Courthas stated, “Interest. is an increment that accrues” to the principal fund earning it, and, unless lawfully separated from the principal, becomes apart of the principal. 

### Sellers, 483 S.W.2d at 

### 243;accordLawson, 220 S.W. at 272. Interest on a fund created by statute, however, may be severed by means of a statute expressly overruling the common law. The legislature may overrule the common law ifit does so expressly. See 

### Sellers, 483 S.W.2d at243. With respect to aspecial fund, legislation overruling the common law must be of equal dignity to the law creating the fund. Thus, interest earned on a constitutionally dedicated public fund may be severed only by constitutional amendment, while interest earned on a statutorily dedicated public fund may be severed by statutory amendment. See 

### Lawson, 220 S.W. at 272-73; Tex. Att’y Gen. Op. No. JM-539 (1986) at 3. With respect to afund created by statute and belonging to the county, section 113.021(c) of the Local Government Code expressly overrules the common-law rule that interest follows the principal. Under that section, any interest that accrues on a special fund belonging to the county “is for the benefit of the county in accordance with other law.” TEX.Lot. GOV’T CODE ANN. § 113.021(c) (Vernon 1988). While section 113.021(c) does not expressly limit its application to the interest accruing on funds created by statute, the law must be construed to be so limited. The legislature may not attempt to sever the interest on aconstitutionally created special fund by means of astatute. See 

### Lawson, 220 S.W. at 272-73; Tex. Att’y Gen. Op. No. JM-539 (1986) at 3. Consequently, the interest on ahot-check fund must be severed from the hot-check fund and accrue to the county’s benefit ifthe hot-check fund is“money belonging to the county” forpurposes of section 113.021(a). See TEX.LOC.GOV’T CODE ANN. 5 113.021(c) (Vernon 1988) (ordering severance ofinterest). As we have said inprevious opinions, expenditures from the hot-check fund are solely within the prosecutor’s discretion and wholly outside the county commissioners court’s budgeting process. See Tex. Att’y Gen. Op. Nos. DM-357 (1995) at 6;MW-439 (1982) at 6; Tex. Att’y Gen. LO-96-075, at 2; LO-96-074, at 4. But this fact is of little relevance to determining whether the hot-check fund belongs to the county orbelongs to some other entity for the purpose of ascertaining the disposition of interest on the fund. We conclude the hot-check fund is money belonging to the county. The legislative history ofthe phrase “money belonging to acounty” indicates that itis meant to distinguish public money benefitting some aspect ofcounty government from money belonging to ormeant tobenefit another (noncounty) public entity or aprivate individual or entity. Cf: Tex. Att’y Gen. Op. No. DM-396 (1996) at 4 (stating that restitution justice of peace receives under Penal Code section 32.41(e) does not belong to county, but rather to holder of dishonored check). In 1933 the legislature authorized the county auditor in counties with populations of 190,000 or more to “adopt and enforce regulations

. essential to the speedy and proper collection and checking of, and accounting for, the revenues and other funds and fees belonging tothe county orto any person, firm, or corporation for whom [acounty] officer may have made collections, or for whose use orbenefit [the officer] may have received ormay hold such funds.” See Act approved Apr. 29,1933,43d Leg.,The Honorable Michael P. Fleming - Page 3 (X-0062)

R.S., ch. 98, sec. 1, art. 1656a, 1933 Tex. Gen. Laws 217, 217-18. Thus, the law distinguished between money belonging to the county and money belonging to a private entity and did not contemplate an alternative owner. Additionally, the county treasurer is custodian of all money belonging to the county. See TEX.Lot. GOV’TCODE ANN. $4 113.001, .003 (Vernon 1988). The hot-check fund is a special fund in the county treasury. See TEX.CODE GRIM.PROC.ANN. art. 102.007(f) (Vernon Supp. 1999) (designating hot-check fund “special fund” in county treasury). In answer to your question, the interest on the hot-check fund accrues not to the hot-check fund but to the benefit ofthe county. The county’s general fund isapermissible beneficiary, but we need not consider here whether itisthe sole permissible beneficiary. This conclusion accords with a prior opinion of this office, Attorney General Opinion JM-632, which determines that interest earned on ahot-check fund must be severed from the principal and deposited inthe county’s general revenue fund. See Tex. Att’y Gen. Op. No. JM-632 (1987) at 1;see also TEX.CODE GRIM.PROC. k-IN. art. 102.007 (Vernon Supp. 1999) (Fee for Collecting and Processing Sight Order); Act of May 24, 1991,72d Leg., R.S., ch. 396,§ 2,199l Tex. Gen. Laws 1508,1509 (renumbering Code of Criminal Procedure article 102.007(e) as article 102.007(f)); Act of May 17, 1985, 69th Leg., R.S., ch. 269, sec. 1,$102.007(e), 1985Tex. Gen. Laws 1300,1303 (renumberingCodeofCrimina1 Procedure article 53.08(e) as article 102.007(e)). Although we reach the same conclusion this office reached in Attorney General Opinion JM-632, that opinion does not make clear that astatute explicitly authorizes the severance ofinterest from the principal of ahot-check fund. The opinion cites, in passing, the statutory predecessor of Local Government Code section 113.021(c), Texas Revised Civil Statutes article 1709a, but the opinion does not rely on article 1709a in reaching its conclusion. See Tex. Att’y Gen. Op. No. JM-632 (1987) at 1, 3. Rather, the opinion reasons that the hot-check fund is astatutory fund, not atrust fund, and that, consequently, interest on the fund need not follow the principal. See 

### id.at2-3. The opinion then states that the legislature has adopted a statute requiring that interest on such “statutory funds” be credited “to the general revenue funds of the respective counties,” but the opinion cites article 1709 ofthe Revised Civil Statutes instead ofarticle 1709a. See 

### id.at 3. Article 1709 at that time required that “all moneys belonging to the county” be turned over to the county treasurer; required the county treasurer to “keep and account” for all county money in adesignated depository; and required the county treasurer todisburse county money asthe county commissioners court directed. See Act ofMay 21, 1971,62d Leg., R.S., ch. 467, 4 1, 1971 Tex. Gen. Laws 1654 (current version at TEX.Lot. GOV’T CODE ANN. 5s 83.006,113.001, ,003, .041 (Vernon 1988 & supp. 1999)). In our opinion, the critical issue in determining whether interest may be severed from the principal ofa fund created by statuteunder section 113.021 ofthe Local Government Code depends not upon whether the fund is held in trust, but whether the fund belongs to the county. While the indicia ofatrust, listed inAttorney General Opinion JM-632, may be helpful indetermining whether the fund belongs to the county, they may not resolve the issue. See Tex. Att’y Gen. Op. No. JM-632 (1987) at2(listing, asindicia ofatrust fund, (1)that funds are administered by trustee; (2)that funds are not granted to county in its sovereign capacity nor collected for county’s general operation; andThe Honorable Michael P. Fleming - Page 4 (X-0062)

(3) that funds aretobe spent and invested for specific, limited purposes and tobenefit specific group ofindividuals). The legislature may decide to sever the interest from the corpus of even astatutory “trust,” or special fund, held for apublic entity, ifit does so expressly. See 

### Lawson, 220 S.W. at 272-73. To the extent the reasoning ofAttorney General Opinion JM-632 is inconsistent with this opinion, it is modified. SUMMARY In accordance with Local Government Code section 113.021(c), interest that accrues on the principal of a prosecutor’s hot-check fund, astatutory fund established under article 102.007(f) of the Code of Criminal Procedure, must be severed from the principal. The interest accrues instead “for the benefit ofthe county.” Attorney General Opinion JM-632 (1987) ismodified tothe extent its reasoning is inconsistent with this opinion.

JOHIN CORaYN Attorney General of Texas ANDY TAYLOR First Assistant Attorney General CLARK KENT ERVIN Deputy Attorney General - General Counsel ELIZABETH ROBINSON Chair, Opinion Committee Prepared by Kymberly K. Oltrogge Assistant Attorney General