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# TheAttorney GeneralofTexas
July 19: 1982 MARKWHITE Attorney General

Supreme Court Building P.0. Box12546 AUS,,“, TX. 76711. 2546 5121475-2501 Telex QlOl674~1M7 Telecopier 5124475-0266

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AnEqualOpportunity! Afflrmatl~e Action Employer Eonarable Stan Schlueter Chairman Opinion No. k%A96 Committee onFinancial Institutions Re: Construction of House Texas House of Representatives Bill No. 1208 P. 0. Box2910 Austin, Texas 78769 Dear Representative Schlueter: You have requested our opinion regarding the interpretation of House Bill No. 1208, passed by the Sixty-seventh Legislature and codified asarticle 2529b-1. V.T.C.S. Youfirst ask:

May securities pledged to eecure public deposits pursuant to House Bill No. 1208 be pledged to the full extent of market value? Section 2of article 2529b-1 clearly states, in pertinent part:

Investment securities or any ownership or beneficial interest [tlherein shall be eligible and lawful security for all deposits of public funds of the State of Texas andanv uublic anencv - . to the extent of the market value the;eof: (Emphasis added). Prior to the enactment of this bill, our laws haddiffering valuation rules for various types of depositories. One obvious intent of article 2529b-1 was to remove those differences by stating auniform rule. Texas courts have long recognized a fundamental rule of statutory construction. set out in Mlngus v. Kadane, 125 S.W.2d 630, 631 (Tex. Civ. App. - Fort Worth 1939, writ dism’d judgmt. car.). wherein the court cites volume 59, page 910of Corpus Juris, stating:

Wheretwolegislative acts are repugnant to, or in conflict with, each other, the one last passed, being the latest expression of the legislative will, will, although it contains no repealing clause, govern, control, or prevail, so as to supercede and impliedly repeal the earlier act to the extent of the repugnancy.

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Article 2529, V.T.C.S.. most recently amended in 1967. see Acts 1967, 60th Leg., ch. 738, at 1991, enumerates the securitieshat a bank maypledge as security for state funds in order to qualify as a state depository. This statute then provides as follows:

All of such securities may be accepted by the [State Depository] Board, provided the aggregate amount thereof is not less than twenty per cent (20%) greater than the total amount of state funds that they secure; provided that the amount of all bonds andother obligations offered as collateral shall be determined by the Board on the basis of either their par or market value, whichever is less. Article 2529b-1 was enacted in 1981. This statute does not have a repealer clause, but section 3provides as follows:

Theprovisions of this Act shall be cumulative of all other existing laws, but shall be full and complete authority for investment securities tobe eligible to secure public funds without reference to anyother law. (Emphasis added). Article 2529b-1 does not repeal in toto any prior statutes relating to security for public deposits. However, considering the general rule followed in Mingus, it is clear that any prior conflicting statutory provisions regarding valuation of pledge securities were repealed by the enactment of this statute. It provides that “[i] nvestment securities... shall beeligible andlawful security for all deposits of public funds... to the extent of the market value thereof

.‘I E2. “Investment securities” include government securities andobligations issued by apublic agency. The terms “government securities” and “public agency” are defined in section 1of article 2529b-1. Consequently, the securities included within the definitions of

“[l]nvestment securities” in the later enacted statute are lawful security for the deposit of public funds “to the extent of..

. market value. ” Securities, if any, that are not included within the definition of “[iInvestment securities” inarticle 2529b-1 and that are specifically listed in article 2529 are to be valued at “either their par ormarket value, whichever is less.” The Sixty-seventh Legislature also passed another statute with similar provisions. House Bill No. 2050, entitled theBondProcedures Act of 1981 andcodified as article 717k-6, V.T.C.S.. was passed and became effective only days after House Bill No. 1208. House Bill No. 2050has broader definitions of issuers of public securities andthose

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. * Honorable Stan Schlueter - Page 3 (MU-496)

securities eligible to pledge against deposits of public funds than House Bill No. 1208, but has the same valuation rule wherein it states: Said bonds also are eligible to secure

deposits of any public funds of the state or any political subdivision or public agency of the state, andare lawful and sufficient security for the deposits to the extent of their market value, whenaccompanied byany“nmatured coupons attached to the bonds. (Emphasis added). V.T.C.S. art. 717k-6, 09. Thus. House Bill No. 2050 reiterates the legislature’s will that “market value” be the rule for valuation of eligible securities pledged tosecure public deposits. Even though article 2529b-1 now directs the State Depository Board to value pledged securities “to the extent of the market value thereof ,‘I the board retains the power “to reject any and all collateral or surety bonds tendered by a state depository, without assigning any reason therefor,” and its action in doing so is final and not subject to review. V.T.C.S. art. 2529. Moreover, any securities pledged by a depository are subject to the following provision of article 2529. V.T.C.S.:

In the event themarket value of the securities pledged by any depository shall decrease to the point where the collateral value of said securities, as fixed by the Board, is less than the amount of said funds on deposit in said depository, the Board shall require additional security in order toequalize such depreciation. Your second question relates to the form of such securities. You specifically have asked:

Arebonds, fully registered, registered as to principal only andbonds registered as to interest only eligible to secure deposits under House Bill No. 1208? The term “fully registrable” means, with reference to public securities, that both the principal and interest of such securities are payable only to the registered owner thereof. V.T.C.S. art. 715b. §2(2). Public securities maybe issued in a form that makes them either unregistrable, fully registrable or registrable as toprincipal only. Id. 13.

- Seealso V.T.C.S. art. 717k-6, 94. House Bill No. 1208 contains no limitations on the form of the investment securities eligible to secure public deposits. House Bill No. 2050 provides:

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Sec. 4. Thegoverning body of anyissuer is authorized to issue bonds andthe interest coupons appertaining thereto, if any, in such form or forms, with provision for registering such bonds as to principal or as to principal and interest, or with provision for changing the form or forms of such bonds and interest coupons, if any, in suchmanner as shall be specified bythe governing body of the issuer in the resolution, order, ordinance, or other proceedings authorizing the bonds.Sec. 5. Thegoverning body of anyissuer ia, authorized to issue bonds constituting aseries of anynumber of bonds, or asingle bond, payable in one stated amount or in stated installments to the bearer, or toaregistered or anamedpayee, or to the order of, or to the successors or assigns of, such registered or namedpayee, andprovision may bemadefor the conversion of anybond or interest coupon, upon request or demand of the bearer... registrable as toprincipal or as toprincipal and interest, or into fully registered bonds without interest coupons, or into any other form.... (Emphasis added). V.T.C.S. art. 717k-6. %%4.5. Thus, House Bill No. 2050 is virtually limitless as to the form of the eligible securities. Such securities are eligible to be pledged in bearer form with coupons attached registered as to principal or as to principal and interest, or into fully registered bonds without interest coupons, or in any other form authorized bythe governing body of the issuer. SUMMARY Securities pledged to secure public deposits pursuant to article 2529b-1 maybe pledged to the full extent of their market value. They are eligible tobepledged inbearer formwith coupons attached, registered as to principal or as to principal and interest, or into fully registered bonds without interest coupons, or in any other form authorized by the governing body of the issuer. 

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Attorney General of Texas

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JOHNW.FAINTER,JR. First Assistant Attorney General RICHARDE. GRAYIII Executive Assistant Attorney General Prepared byLaddD. Pat1110 Assistant Attorney General APPROVED: OPINIONCOMMITTEE SusanL. Garrison, Chairman Rick Gilpin Patricia Hinojosa LaddD. Pat1110

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