# The Attorney General of Texas

May 5, 1983 JIM MATTOX Attorney General

Supreme Court Building I’ 0. Box 12546 Austin. TX. 76711. 2546 5121475-2501 Telex 910/8741367 Telecopier 5121475-0266

1607 Main St., Suite 1400 Dallas, TX. 75201.4709 2141742-6944

4624 Alberta Ave.. Suite 160 El Paso, TX. 799052793 915/533-3464

,- 10 Dallas Ave.. Suite 202 Housfon. TX. 77002-6966 713/650-0666

606 Broadway, Suite 312 Lubbock. TX. 79401-3479 6061747-5236

4309 N. Tenth, Suite 6 McA,,en. TX. 76501-1685 5121682-4547

200 Main Plaza. Suite 400 San Antonio, TX. 76205.2797 5121225-4191

An Equal Opportunity/ Affirmative Action Employer HonorableWarren New Yoakum CountyAttorney P. 0. Box 359 Plains,Texas 79355 OpinionNo. JM-29
Re: Whether article 2529c, V.T.C.S., authorizes a city to contractwith a depositorybank when a majority of the city COUIlCil members are stockholders in thebank
DearMr. New:
You ask whether the city council of a general law city is prohibited from entering into a depositorycontractwith a bank when a majority of the city council members are stockholders in that depositorybank. We conclude that, in the situationyou describe, the city council of a general law city is prohibited from entering into such a contract.
You suggest that,by entering into the contract, the city council has violated articles 2529c and 988, V.T.C.S., as well as section 39.01 of the Penal Code. Article 2529c, V.T.C.S., governs the selection and qualification of depositories of state agencies and political subdivisions;it will be discussed later. Section 39.01 of the Penal Code provides that a public servantcommitsan offense ifhe knowingly or intentionallyengages in officialmisconduct. Because a determination of whether section 39.01 has been violated in this instance necessarily requires the resolution of disputed matters of fact,we will not address that issue in this opinion. Article 2529c, V.T.C.S., governs the selection and qualification of depositories of state agencies and political subdivisions and provides at section 2 the following in pertinent part:

A bank shall not be disqualified from bidding and becoming the depository for any agency or political subdivision of the state by reason of having one or more officers, directors or stockholders of saidbank who individuallyor collectively own or have a beneficial interest innotmore than 10 percent of the bank'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;

p. 126HonorableWarren New - Page 2 (JM-29)

provided,however, that saidbankmust be selected as the depository by a majority vote of the members of theboard, commission,or otherbody of such agency or political subdivisionand no member thereofwho is an officer, director or stockholder of the bank shall vote or participate in the proceedings. (Emphasisadded). The statute requires that a depository bank be selected by the vote of a majority of board members. All stockholders in a bank are disqualified fromvoting in favor of it. On the factsyou present, a majority of the council members were disqualified from voting to choose as depository the bank in which they owned stock. Thus, the action takenby the city councilmembers ismanifestly inviolation of the statute.
We thereforeconclude that the city councilof a general law city is prohibited by article 2529c, V.T.C.S., from entering into a depository contract with a bank when a majority of the city council members are stockholdersin thatbank.
SUMMARY The city council of a general law city is prohibited by article 2529c, V.T.C.S., from entering into a depository contract with a bank when a majority of the city council members are stockholdersin thatbank.

JIM MATTOX Attorney General of Texas TOM GREEN FirstAssistantAttorney General
DAVID R. RICHARDS ExecutiveAssistantAttorney General Preparedby Jim Moellinger AssistantAttorney General
APPROVED: OPINION COMMITTEE SusanL. Garrison,Chairman Jon Bible Rick Gilpin Jim Moellinger CharmaineRhodes Nancy Sutton
p. 127