April 23, 1990

Honorable Tim 

### Curry Criminal DistrictAttorney 200 West Belknap Street FortWorth, Texas OpinionNo. JM-1162

Re: Status of trust funds 76196-0201 held by a district clerk

(RQ-1816)

Dear Mr. Curry:

You ask seven in regard to funds

.. _ questions about a district clerk's duty held in trustby him until finaldisposition oy a coun
. Your first question is "What funds are includedwithin the definition of 'trust funds' in chapter 117 of the Local GovernmentCode?"

This officehas previously answered this question in Attorney General Opinion H-183 (1973). That opinion considered the definition of a "trust fund" forpurposes of article 2558A, V.T.C.S. (now found at chapter 117, Local Government Code).

We stated:

A trust is an equitable obligation under which the trustee is required to deal with the trust property for the benefit of the beneficiarieswho have avested interest in the trust funds. Any funds fitting this definition are trust funds and, if in the possession of the county or district clerk, may be deposited in the countydepository for

tNSt funds.

. . . .
We believe that anymoney deposited in court to satisfy the result of a legal proceeding
or to await the result of a legal proceeding fallswithin the scope of 5 11 (now, 55 117.052, 117.053,LocalGovernment Code).

Attorney General OpinionH-183 (1973)at 846, 848.HonorableTim Curry - Page 2 (JM-1162)

That opinion determined that civil court deposits, probate court deposits, and child support payments paid through the clerk's office would be classified as trust funds. You ask specifically about interpleader funds, supercedeas deposits, funds paid in satisfaction of judgments, cash bonds,minor#s trust funds, and deposits in eminent domain proceedings.
Interpleader funds are, of course, deposited in a court to await the court's determination of ownership. Thus, interpleader funds are included in the scope of chapter 117.
m Sellers v. wis County, 483 S.W.ld 242 (Tex.1972). Similarly, supercedeasdeposits are paid to suspend the execution of a judgment pending appeal, which is **also a**  legalproceeding and thuswithin chapter 117 of the Local Government Code. &G Saena r v. Pro kG 232 S.W.2d 106 (Tex.Civ.App. -Austin 195:,writ refsd):

Fundspaid in satisfactionof judgments arepaid as the result of a legal proceeding,and as stated in Attorney General Opinion H-183, those funds are includedwithin the chapter 117 provisions of the Local Government Code. We note that fundspaid in satisfactionof a judgmentmay not be paid into courtwithout the order of the court. Iowa Mtu, 313 S.W.2d 897 (Tex.App. - l-ks~on l&8): Texas & P.R. Co.v. Walk=, 57 S-W: 568 (Tex. 1900).

You ask about wcashbonds," whichwe understand to be cash deposited in lieu of bonds. These funds are,we think, generally of the same nature as interpleader funds and supercedeasdeposits and, thus, fallwithin chapter 117 of the Local Government Code. See. e.o., RulesApp. Proc. Rule 46(b).

We find no statutoryprovisions relating to **%inor ‘** **5** trust funds." However, under the terms of chapter 142 of the Property Code, fundsawarded to aminor or an incapacitated person who has no legal guardian are paid into the registry of court. mber v. SouthernNat'1 Life Ins. Co,, 326 S.W.2d 715 (Tex. Civ.ADD. writ ref'd). These trust funds - **San** Antonio 1959, &e also within the scope of chapter 117 of the Local Government Code. Any funds depositedwith the clerkunder this chapter are deposited under court order and may be invested for the benefit of the minor by order of the court. Prop. Code 5 142.004.
a 6 S.W.2d 796-(Tex. See McClendonv. aa , Civ.App. - Waco 1928,writ dism'd).

Eminent domain proceedings are also "legal proceedings," and cash deposited to reimbursea property ownerHonorable Tim Curry - Page 3 (JM-1162)

is generally included in chapter 117 of the Local Government Code. &? fitv of San &&nio v. Bura 65 S.W.2d 408 (Tex. Civ.App. - San Antonio 1933, no wgit). However, the condemnor of realproperty may, **under** section 21.021(d), direct that the eminentdomain deposit be placed in an account of its own choosing.

Your second through fifth questionsregard the necessity of depositing trust funds in separate accounts or interestbearing accounts. Chapter 117 of the Local Govenment Code contains no express requirements that funds deposited in a court **be** placed either in separate accounts
or in interestbearing accounts. Of course, the first duty of the clerk is to followthe instructionsof the court that directedhim to hold the funds. &8 WcLennan Co. v. Amer, at'1 Ins. Co,, 457 S.W.2d 597 (Tex.Civ.App. - Wad.0 1970, writ ref*d n.r.e.). We note that the county commissioners court and the county auditor have some discretionary authority regarding fundsheld by the clerk for the benefit of others. The exercise of that authority could invest the clerkwith additionalduties in regard to those funds.

Section 112.002of the Local GovernmentCode permits a county auditor to require certain accountingprocedures in regard to trust funds. As we noted in Attorney General Opinion H-183 (1973), "[t]he sheriff,district clerk and county clerkmust deposit fundsunder procedures established by the county auditor." Conceivably,the county auditor could require that trust funds be placed in separate accounts "for the speedy and proper collecting, checking, and accounting" of the funds.
Similarly, section 117.051 permits the county commissioners court to require that fundsheld in trust be placed in time deposits. As it applies to countydepositories, the term "timedeposit" isdefined simply as

a deposit of funds subject to a contract between the depositor and the depository underwhich the depositor may not withdraw any of the funds by check or by another
manner until the expiration of a certain period following written notice of the depositor's intentto withdraw the funds.

LocalGov't Code 5 116.001(3). "Time depositO'is treated elsewhere as the equivalent of a savings account in a commercialbank and is definedby other authorities to mean, among other things, "cash in a bank earning interest." Black's Law Dictionary 1330 (5th ed. 1979). See also Attorney General Opinion M-468 (1969). The legislature, furthermore,anticipated that trust fundsplaced in time

p. 6136HonorableTim Curry - Page 4 (JM-1162)

depositswould earn interest.m Local Gov*t Code § 117.054 (discussedbelow). A requirementthat fundsbe placed in a "timedeposit"would, we think,be a requirement that the funds generate interest.

you have indicatedthat inTarrant County the commissioners court has not required that trust fundsbe left in time deposits under section 117.051 and that the county auditor has not promulgated regulations under section 112.002regarding the deposit of such funds. We find no requirement in chapter 117 that trust funds either collect interestor that they be deposited in separate accounts. &S Esrris Co. Wm 507 S.W.2d 848 (Civ.App. - Houston [14thDist.; 1974,writ'ref'd n.r.e.). Nor do we find any such requirements in the statutes relating.fo the specific types of funds aboutwhich you ask. Thus,we believe that the clerk of court has no duty to deposit such funds in separate accounts or in interestbearing accounts, except as such dutymay be imposedby the court or other authority. Our conclusion isbuttressedby the fact that statutes that delineate the liabilityof county and district clerks in regard to their handling of trust fundsdeposited in court do not identify the failure to deposit in separate accounts
or in interestbearing accounts as a source of liability for the clerks. Local Gov't Code 9s 117.081, 117.082: Civ. Prac. 61

Rem. Code 5 7.002.

In your sixth questionyou ask:

Does the countyhave the right to receive any interestaccrued on any fundsmaintained by the District Clerk (&, is S 117.054 of the Local Government Code constitutional)?

Section 117.054provides the following:

(a) A county is entitled to receive a part of the interestearned on trust funds placed in time deposits under Section 117.051. The amount receivedby the county must be reasonablyrelated to the accounting and administrativeexpenses incurredby the county inhandling the funds.
(b) The county auditor on behalf of the commissionerscourt or, if there is no county auditor, the county treasurer, shall deposit the amount of compensation in the general fund of the county.
Section 117.054 isderived from sections 4a and 4b of formerarticle 2558a,V.T.C.S. Prior to recodification as

p. 6137Honorable Tim Curry - Page 5 (JM-1162)

C part of the Local Government Code, section 4a of article

2558a directed the commissioners court to receive all **interest** earned on the **time** deposits of trust funds and to deposit such interest in the general fund of the county "as
an offset to the expenses of handling such trust funds for the benefit of litigants." Section 4b authorized the same with respect to accumulated interest derived from trust funds in the custody of the district or county clerk prior to the enactment of section 4a in 1959. These provisions
were declaredunconstitutionalby the Texas Supreme Court in Sellers v. Harris Co, 483 S.W.Zd 242 (Tex. 1972). The court held that the' statute violated the due process guarantees of the state and federalconstitutions because itdeprived the owner of the trust funds of a sum that was not reasonably related to thevalue of the county's services funds. See also Webb's
(county'staking of interest ac&iny& ~&$~der (1980) fund depositedwith court clerk in addition to fee charged for clerk's servicesviolated Fifth and FourteenthAmendments of U.S. Constitution). United m, 110 S. Ct. 387,%689) (userfee need note be precisely calibrated to the benefit received from governmental services).

The revisor'snote to section 117.054 states that the Sell rs opinion indicatedthat article 2558awas unconstitutionzl only to the extent that it deprives a person of due process and was still operable so long as the county received an amount reasonablyrelated to the value of the county's services. The note citesAttorney General Opinion M-1198 (1972) as support for this reading of Sm. Section 117.054, it isnoted, was drafted to reflect the interpretationof article 2558a in Sellers.

With the constitutional infirmities of article 2558a removed, section 117.054authorizes the county to receive an amount of the interest earned on trust funds that is reasonably related to the accounting and administrative expenses incurred by the county in the handling of the funds. However, as you note inyour brief, section 117.054 must be read in conjunctionwith section 117.055 of the Local GovernmentCode. The latter sectionprovides:

(a) To compensate the county for the accounting and administrative expenses incurred inhandling the trust funds for the benefit of litigants in civil proceedings, the countymay collect from the nonprevailing party in the litigationor from the party the court designates a fee in an amount set by the commissioners court,but not to exceed

P. 6138HonorableTim Curry - Page 6 (JM-1162)

$50. The fee is in addition to any fees the district clerk collects as authorized by statute or court order.
(b) The county treasurer shall deposit the fee in the general fund of the county.

Local Gov't Code 5 117.055 (asamended by Acts 1989, 71st Leg., ch. 1, 8 16, at 16).

On first reading, sections 117.054and 117.055 appear to create a conflict. Section 117.054,on the one hand, authorizesa county to collect from accrued interest on trust funds an **aXCu ’** **k** "reasonablyrelated" to the county's uaccounting and administrative expenses,I while section 117.055appears to limit the county's charge for lqaccounting and administrative expenses u to an amount not to exceed $50.

We do not believe there is any conflictbetween the two sections. Nor do we believe that the county is authorized to assess two charges for the same "accountingand administrative expenses." Rather,we can **read** the two statutes togetherby noting that the charge authorizedby section 117.054 is limited to those funds deposited in time deposits as ordered by the commissioners court under section 117.051. With this reading,we avoid the constitutional problems found in Sellers, and inw's Fabulous

. Furthermore,we give effect to both statutes.

As noted above, the Tarrant County Commissioners Court has not mandated that trust funds be deposited in time depositsunder section 117.051. Thus,we believe that in Tarrant County, section 117.055 is the operative law for the assessment of fees **for** handling trust funds for the benefit of litigants. Of course,under that statute, it remains for the commissionerscourt to designate the fees.
Finally,you ask:

Can the District Clerk pass costs of establishing andmaintaining trust fundsback to litigatingparties when the funds are paid out?

As noted above, the supreme courts of both Texas and theUnited States have implied that a countymay collect
a fee reasonably related to the costs of depositing and accounting for funds that are held in trust for others. m sellers, si!mza: tSl+U233*
Section 117.054of the LocalGovernment Code entitles the county to receive a part of the interest aCCNed on time

p. 6139HonorableTim Curry - Page 7 (JM-1162)

deposits, and section 117.055 (asamendedby **Acts** 1989, 71st Leg., ch. 1, f 16, at 16) allows the collection of a feenot to exceed $50 for handling trust funds for the benefit of litigants in civil proceedings. **As** we determined in **Attorney** General Opinion JH-434 t-861, the expense of handling the trust fundmust have been incurredprior to the assessment of cost,which cannot be done until the outcome of the litigation. Attorney GeneralOpinion JM-434 (1986).

SUMMARY

The trust funds included in chapter 117 of the Local Government Code include, m u, civil court deposits, probate court deposits, child supportpaymentspaid through the clerk's office, interpleader funds, supercedeasdeposits, fundspaid in satisfaction of judgments, other cash deposits made in lieu of bonds,minor's trust funds, and eminent domaindeposits. The district clerk is not required to investthese funds for interest or to deposit them in separate accountsunless so orderedby the court or other authority. The costs of establishing and maintaining these trust funds are properly assessed against the party that ultimately receives them or as directed by the court at the time the fundsare paid to the owner.

MATTOX Attorney General of Texas

MARYNELLRR FirstAssistantAttorneyGeneral

JUDGE ZOLLIE STHAHLEY SpecialAssistantAttorney~General

RENEA HICKS SpecialAssistantAttorneyGeneral

RICK GILPIN Chairman,Opinion Committee
Preparedby Karen C. Gladney AssistantAttorney General

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