Court Opinion

ID: 4132730
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:29:45.091883+00
Date Added: 2024-06-11T14:37:39.041924
License: Public Domain

TFIE ATTORNEY    GJCNBZRA~
                             OF TEXAS

  aouF#%.arrr.
A-        Q-AL
                                         July 25, 1975

       The Honorable Oscar B. McInni6                 Opinion No. H- 649
       Criminal Dirtrict Attorney
       Hidalgo County                                 Re:     Whether a city may
       Edinburg, Texas                                        borrow money from
                                                              a bank of which the
       Dear Mr.    McInnis:                                   mayor ia a director.

          You have requerted our opinion regarding whether a My        may borrow
       money from a bank of which the mayor is a director.

           Article 988, V. T. C.S.,   a part of our rtatutory law since 1875. pro-
       vides in pertinent part:

                 . . . No member of the city council, or any other
                 officer of the corporation, shall be directly or
                 indirectly intererted in any work,  bueinees, or
                 contract, the expenre, price or consideration of
                 which to paid from the city trearury, or by an
                 araerament levied by an ordinance or resolution
                 of the city council . . .

            In Attorney General Opinion H-638 (1975) we were asked if a city
       official could remain, pecuniarily interested in a contract made with the
       city before he wae elected to his public position.    After reviewing the
       conrtruction put on article 988 by the court in City of Edinburg v. Ellis.
       59 S.W.2d 99 (Tex. Comm. 1933), we determined that the continued rela-
       tionrhip wao not permtesible.     We noted that a rule of liberal construction
       will be applied to article 988 in o>der to effect its purpore, and that a
       public offtcial must avoid a position where hia private pecuniary interest
       might cot&t     with his public duty. See Attorney General Opinions M-714
       (1970), V-640 (1948). z.     Attorney General Opinionlr H-624 (1975),
       C-438 (1965); WW-1241 (1962); Attorney General Letter Adiveory No. 111
       (1975). Alro Bee rection 39.01, Texar Penal Code.

                                         p. 2851
The Honorable Oscar B. McInnis.     page 2   (H-649)

   The broad language of article 988,    V. T. C. S.,   would compel a
negative answer to your question.

    It has been suggested however, that the enactment      of article 2529c,
V.T.C.S.,    effectively repealed article 988 insofar as   it might prohibit
transactions between banks and cities whose officials      sit on the bank’s
board of directors or own a small percentage of stock      in the bank. That
1967 statute reads:

           Section 1. The selection and qualification oJ
       depositories for the deposit of public funds of all
       agencies and political subdivisions of the state shall
       be.in accord with the laws now in effect and herein-
       after enacted Pertaining thereto.

           Sec. 2. The fact that an employee or officer of a
       state agency or political subdivisibn, who is not
       charged with the duty of selecting the depository
       thereof, is an officer, director or stockholder of a
       bank shall not disqualify said bank from serving a~
       the depositoryof said state agency or subdivision.

            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 said
       bank who individually or collectively own or have a
       beneficial interest in not more 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 sub-
       divlrion; provided, however, that aaid bank must be
       selected as the depository by a majority vote of the
       members of the board, commission,        or other body
       of such agency or political subdivision and no member
       thereof who ir an offtcer, director or stockholder of
       the bank shall vote or participate in the proceedings.
       Common-law rules tn conflict with the terms and pro-
       vistons of this Act are hereby modified as herein pro-
       -but       this Act shall never be deemed to alter, change,
       amend or supersede the provisions of any home-rule city
       charter which is in conflict herewith.

                                  p. 2852
The Honorable Oscar B. McInnis,   page 3   (H-649)

    An act applicable to “all agencies and political subdivisions of the
state” obviously includes cities, and the final sentence of the statute
specifically refers to “any home-rule city charter. I’ However, Attorney
General Opinion M-331 (1969) held that an independent school district
which had adopted the School Depository Act’could borrow money from
its school depoaitory even though a member of the school board was alro
an officer or stockholder in the depository bank. This result was said
to flow from the enactment of a statute,( V. T. C. S., art. 2832~; now
Education Code, 5 23.75) similar to article 2529~ which allows school
boards to select banks for depositories under certain circumstances
even though members of the school board might have interests in the
banks selected.

    Attorney General Opinion M-331 suggested, “[i]t would be inconristent
and ‘illogical to conclude that the Legislature intended that a school
district could choose as a depository a bank in which a member of the
school board was a director or stockholder, but could not borrow money
frbm this same bank.”

    But, Attorney General Opinion O-6280 (1944) advised that a school
board was not authorized to borrow money from a bank where a member
of the rchool board was also a director of the bank. It was said:

            It is as old as the Common Law that a public
       official may not in his official capacity make a
       contract in which he is pecuniarily interested.
       Williston on Contracts, Vol. 6, Sec. 1738. Not
       only did Texas adopt the Common Law as the
       rule of decision as early as 1840, but the fore-
       going principle hae been consistently affirmed
       wherever the question has arisen.

     Although Attorney General Opinion M-331 found little difference between
depositing public funds in a depository bank and borrowing funds from that
depository, there are numerous statutory requirements regarding the
qualifications and selection of a depository and the security which must be
provided to protect the governmental body’s deposits.    See Education Code,
fi 23.71 et seq. These restrictions and requirements donot apply to other
transactions such as the type you describe.    Compare Attorney Genexa 1
Opinion V-640 (1948).

                                p. 2853
.   -

        The Honorable Oscar B. ‘McInnis,      page 4     (H-649)

             Given the statutory prohibition against self-dealing contained in
        article 988, V. T. C. S., the difference between the nature of the
        transactions involved in your question and those contemplated by
        article 2529~. V. T. C. S., and the reasoning of Attorney General
        Opinion O-6280 (1944), we do not believe the Legislature intended that
        article 2529~ should have a wider application than its language plainly
        indicates.   We think a narrow exception to the old and well established
        common-law rule against self-dealing was intended and that intent is
        reflected in the language of the statute where it provides that “common-
        law rules in conflict are hereby modified as herein provided. ” Article
        988, V. T. C. S., was not discussed in Attorney General Opinion
        M-331, which apparently took stock only of common law ortgin of the
        rule. Repeals by implication are not favor~ed and statutes in pazi
        materia will be harmonized, if possible.     53 Tex. Jur. 2d, Statutes,
        0 $111,    186.

            Article 2529~. V. T. C.,S. was enacted by Acts 1967, 60th Leg.,
        ch. 179, p. 370.   That act did not contain a repealer clause and expreraly
        “modified” only common law rules in conflict.     Its title reads:

                  An Act relating to the selection and qualification
                  of deposttories of all agencies and political sub-
                  diviEiOn6 of the state; and declaring an emergency.

            We believe the title correctly reflects the limited purpose and scope
        of the Act. If the Legislature believes that a further exccrption to
        article 988 should be provided to cover the case which pu present, it
        has the power to do so. Since in our view it has not provided that addi-
        tional exception, we answer your question in the negative.

                                SUMMARY

                      A ctty may not borrow money from a bank
                  of which the mayor 1s a director.

                                             -     Very truly your6,

                                                   Attorney General    of Texas

                                         p. 2854
.       -
    .       _

                1

                    The Honorable Oscar B. McInnis,      page 5   (H-649)

                    APPROVED:

                    DAVID M.   KENDALL,    Firet   Assistant

                    C. ROBERT HEATH,      Chairman
                    Opinion Committee

                                                       p. 2855