Court Opinion

ID: 4130387
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:03:41.42318+00
Date Added: 2024-06-11T08:45:31.704557
License: Public Domain

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     Honorable Carl Parker     Opinion No. ~~-1082
     Chairman
     Education Committee       Re: Whether the board of trustees
     Texas State Senate        of a school district may enter
    'P. 0. Box 12069           into a loan contract with     its
     Austin, Texas   78711     depository bank if a trustee is a
                               bank employee (reconsideration of
                               Attorney General  Opinion JM-583
                               (1986)) (RQ-1658)

    Dear Senator Parker:

         You ask whether    the board of trustees of a school
    district may enter into a loan contract with its depository
    bank, and take subsequent action concerning the loan, if a
    board member   is employed by the bank.     Attorney  General
    Opinion JM-583   (1986), in addressing a similar guestion,
    implied that such loan contracts were barred by the common
    law conflict   of interest doctrine, which   invalidates   any
    contract between a governmental body and another entity if a
    member of the governmental body has a direct or indirect
    pecuniary interest in it.    Attorney General Opinion JM-583
    at 4, 7 (1986); see Mevers v. Walker, 276 S.W. 305       (Tex.
    Civ. APP. - Eastland     1925, no writ): Attorney     General
    Opinions JM-424   (1986); H-916 (1976).    However, Attorney
    General Opinion JM-583 did not consider whether chapter    171
    of the Local Government Code applied to such loan transac-
    tions.   Your question    requires   us to reconsider      the
    implication in Attorney General Opinion JM-583 that common
    law conflict of interest rules govern a school district's
    loan contract with its depository bank.

         Our prior opinion dealt with section 23.75 of the
    Education Code, which modifies the common law by allowing  a
    school district to enter into a depository contract with a
    bank in which a trustee    is financially interested   as a
    stockholder, officer, director,  or employee. We concluded
    that section 23.75 was a special statute applicable       to
    school district depository  contracts and that it excepted
    such contracts  from chapter 171 of the Local Government
    Code, a general provision  regulating conflicts of interest
    of local public officials    as a class.    Thus, a school

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Honorable Carl Parker - Page 2    (JM-1082)

trustee who has an interest in a depository bank as defined
by section  23.75 may participate   in decisions  about the
depository contract, without filing an affidavit stating his
interest or recusing himself from participation in decisions
about the depository contract in accordance with chapter 171
of the Local Government   Code. We reaffirm this holding,
which   is limited to matters    affecting   the  depository
contract.

     Attorney General Opinion JM-583 also discussed a second
issue concerning section 23.75 of the Education Code.        We
concluded   that section 23.75 did not permit         a school
district to borrow money from its depository bank         if a
trustee was a stockholder, officer, director, or employee of
that bank, because there was a substantial          difference
between borrowing public    funds from a depository bank and
depositing funds in it. A prior opinion that did not make
this distinction     was overruled.    See Attorney    General
Opinion M-331   (1969) (overruled by Attorney General   Opinion
JM-583); see'also Attorney General Opinion H-649         (1975)
(questioning Attorney General Opinion M-331).

    ~Attorney General Opinion J&583     ended with the con-
clusion that section  23.75 of the Education    Code did not
remove common-law  prohibitions   against  loan transactions
between a school district and its depository     if a school
trustee was also a stockholder,       officer, director,   or
employee of the depository     bank. The opinion    does not
expressly   state that the common law barred       such loan
transactions, but it certainly implies this result.

     On reexamining   Attorney   General Opinion JM-583,     we
realize that our discussion       of the second    issue    was
incomplete.  We correctly determined    that section 23.75 of
the Education Code did not exempt loan transactions     between
a school district     and its depository     from   common-law
restrictions, but we also should have considered        whether
chapter 171 of the Local Government Code changed the law
applicable to such loans.     Chapter 171 modifies the common
law conflict of interest doctrines applicable to all local
officials and all kinds of transactions, while section 23.75
modifies the common law for school depository        contracts
only. See Acts     1987, 70th Leg., ch. 362, 5 6, at 1800
(amendiFV.T.C.S.     art. 988b, § 6, now codified as Local
Gov't Code 5 171.007). When two statutes deal with~the same
subject, one in general terms and the other in a more
detailed way, they should be harmonized if possible.     Culver
v. Miears, 220 S.W.2d 200    (Tex. Civ. App. - Eastland   1949,
writ ref'd).

                                 P.   5653
7

          Honorable Carl Parker - Page 3     (JM-1082)
I     .

               School board members     are "local public officials"
          subject to chapter 171 of the Local Government Code.     Local
          Gov't Code 0 171.001(l); Attorney General Opinion JM-379
          (1985). Banks and other lending institutions are "business
          entities" within chapter    171. Attorney General Opinions
          JM-379 (1985); JM-178 (1984).    In our opinion, chapter   171
          of the Local Government Code applies to loan transactions
          between a school board and its depository      bank. Thus, a
          school board is not barred by common law conflict           of
          interest rules from entering     into  a  loan  contract  with
          its depository bank when a board member        is pecuniarily
          interested in the contract. A school board member with a
          "substantial interest" in the depository bank, Local Gov't
          Code .Q 171.002, must file an affidavit stating his interest
          and must abstain from participating in decisions on loan
          contracts with the depository if "action on the matter will
          have a special economic effect on the [bank] . . . that is
          distinguishable from the effect on the public." Acts     1987,
          70th Leg., ch. 362, § 4, at 1799 (amending V.T.C.S.       art.
          988b, § 4, now codified as Local Gov't Code 5 171.004).
          Attorney   General Opinion JM-583     (1986) is modified    in
          accordance with this opinion.

                                 SUMMARY

                     Chapter 171 of the Local Government    Code
                  applies to loan contracts between a school
                  board and its depository   bank if a school
                  board member has a substantial interest     in
                  the bank.   Section  23.75 of the Education
                  Code applies to a depository contract between
                  a school board and its depository    bank   in
                  cases where a school board member is a stock-
                  holder, officer, director, or employee of the
                  bank. Attorney General Opinion JM-583 (1986)
                  is modified in accordance with this opinion.

                                                JIM     MATTOX
                                                Attorney General of Texas

          MARY KELLER
          First Assistant Attorney General

P--
          MU MCCREARY
          Executive Assistant Attorney General

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Honorable Carl Parker - Page 4    (~~-1082)

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Susan L. Garrison
Assistant Attorney General

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