              .      1,




                                               E
                                     IFTEXAS
                               AGSTIN.   TEXAS       78711

                                   September       10, 1970


Honorable Bruce Gibson
Commissioner                             Opinion No. M-688
Credit Union Department
900 Congress Avenue                      Re: Questions relative to
Austin, Texas 78701                          whether the duties set
                                             forth in Article 2461,
                                             Sec. 12(b), (17), Ver-
                                             non's Civil Statutes,
                                             are mandatory or per-
                                             missive.
Dear Mr. Gibson:
        Reference is made to your letter in which you request
an opinion from this office as to the captioned matter. We
quote from your letter, in part, as follows:
            "Following the recodificationof the
       Credit Union Laws of Texas which became
       effectiveMay 13, 1969, various Credit Unions
       under this Department'ssupervisionhave
       expressed concern as to the legal intent
       of a particular duty of the B,oardof Direc-
       tors of their Credit Unions.
       You then request our opinion to the following questions:

        (1)       Is the duty set out under Articles
                  2461-12(b) and 2461-17, V. C. S.,
                  permissive or mandatory? This is
                  a new provision in the current Act
                  and, if mandatory, could result in
                  a distinct hardship on many of the
                  smaller credit unions.

        (2)       ;f,;Fe answer to (1) above is 'permis-
                        then are any of the subsections
                  of Article 2461-12(b) also permissive?

        (3)       If the answer to (1) above is 'mandatory'
                  then are any of the subsectionsof Article
                  2461-12(b) also mandatory?




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Honorable Bruce Gibson, Page 2, (M-688)

        It is noted that Article 2461-12, Vernon's Civil Statutes,
the Credit Union Act, pertains to the board of directors of credit
union organizations. It is comprised of two subsections,with sub-
section (a) providing as follows:
            "The board of directors shall have the
       general direction of the affairs, funds, and
       records of the Credit Union and shall meet as
       often as nece,ssary,but not less than once each
       month."
        Subsection (b) provides:
             "It shall be the special duty of the
        directors to:. . .'
Following this introductorylanguage are the enumerated special
duties of the board of directors,nineteen in number. Your
questions as heretofore quoted relate to these nineteen special
duties of the board of directors and can be thusly stated: Are
these nineteen special duties of the board of directors as enumer-
ated in Article 2461-12(b)mandatory or permissive?
            "There is no universal rule or absolute
       test by which directory provisions in a statute
       may in all circumstancesbe distinguishedfrom
       those which are mandatory. However, in the
       determinationof this question, as of every other
       question of statutory construction,the prime
       object is to ascertain the legislativeintent."
       82 c,J.s. 869, Statutes, Section 376.
        The crucial test necessarily requires the proper construc-
tion of the phrase9 "It shall be the special duty," and more speci-
fically, the word "shall."
        The Supreme Court of Texas, in the case of Chisholm v.
Bewle Mills, 287 S.W. 2d 943, (Tex. Sup. 1956), observed the
    owing w en confrontedwith our particular question.
357+-E
             "There is no absolute test by which it
        may be determinedwhether a statutoryprovision
        is mandatory or directory. The fundamental
        rule is to ascertain and give effect to the
        legislativeintent. Although the word 'shall'
        is generally construed to be mandatory, it may
        be and frequently fs held to be merely dfrec-
        tory. In determiningwhether the Legislature




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Honorable Bruce Gibson, Page 3, (M-688)

              intended the particularprovision to be manda-
              tory or merely directory, considerationshould
              be given to the entire act, its nature and ob-
              ject, and the consequencesthat would follow
              from each construction. Provisionswhich are
              not of the essence of the thing to be done, but
              which are included for the purpose of promoting
              the proper, orderly and prompt conduct of busi-
              ness, are not generally regarded as mandatory."
        Applying this fundamentalrule as laid down by the Supreme
Court of Texas to the nineteen special duties of Article 2461-12(b),
we reach the following conclusions: Article 2461-12(b), Subsections
G&Q              ~~)l;la;~~co$;)I        (a),   (lo),   (12)     ana   (13)   are   deemed by this
                                                        Article 2461-12(b), Subsections
(6),   (7),      (9),    (ll),      (l~;%~:s~16~,              (17b,   (18)   and (19)   appear
to be permissive or directoryprovis ens, ut could be considered
mandatory under some particular facts and circumstances.
              The mandatory provisions read, in part, as follows:

              ”(1) act upon applicationsfor membership. . .
              ”(2) purchase a blanket fidelity bond. . .

              “(3)      determine from time to time the rate(s)
                        of interest which shall be charged on loans. . .

              ” (4)     declare dividends (if any) in the w  and
                        manner as provided by the bZaiK   . .-
                        (parenthesisours)

              ” (5)     determine the rate(s) of interest to be
                        paid on deposits. . .

              11(a)     fix from time to time the maximum amount. . .
                        which may be loaned to any member. . .
              “(10)     authorize the employmentand compensation
                        of such person. . .as may be necessary to
                        carry on the business of the credit union;
              "(12) authorize the borrowing or lending of money
                    to carry on the functions of the credit unions;
              ” (13)    designate a depository or depositoriesfor
                        the funds of the credit union."
       The permissive or directory provisions involving the
exercise of judgment or discretion under the factual situation



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Honorable Bruce Gibson, Page 4, (M- 688)

presented read.,in part, as follows:
        ”(6)     limit the number of shares which may
                 be owned by a member. . .

        "(7)     fill vacancies occurring between annual
                 meetings on a board of directors, credit
                 committee, and audit committee. . .

        ”(9)     authorize the investmentof funds of the
                 credit union. . .
        "(11) authorize the conveyance of property;
        "(14)    upon two-thirds approval, the board of
                 directors may replace any or all members
                 of the audit committee for failure to
                 perform their duties until the next
                 members' meeting. . .
        "(15)    authorize and provide for the compensation
                 of auditing assistance requested by the
                 audit committee;
        "(16)    suspend from his official position any
                 officer or director who fails to attend
                 regular meetings. . .or who otherwise
                 fails to perform any of the duties re-
                 quired of him as an official;
        "(17)    appoint from its own number an executive
                 committee to exercise such authority as
                 may be delegated to it by the board of
                 directors between meetings of the board
                 of directors;
        yla)     perform or authorize any action consistent
                 with this Act not specificallyreserved. . .
                 for the members, and perform such other
                 duties as the members may time to time
                 require;
        ” (19)   appoint any committees deemed necessary. . .'
        Considering the purpose of each mandatory provision, it
is our opinion these words when read with the prefatory language
of the Article, "It shall be the special duty of the directors to",
are an indication the Legislaturemeant such d ti     fth B     cl
of Directors to be of an imperative nature. P%szkg to the';&-
guage of Chisholm v. Bewley Mills, supra, these provisions are of
the essence of the thing to be done.


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          .        .




Honorable Bruce Gibson,,Page5, (M- 688)


         The permissive or directoryprovisions, i.e., Article
2461-12(b , subsections (6), (7), (g), (lo), (ll), (12), (14)
(s),   (16 I, (17),  (18) ana (19) reflect a legislativeintent
to confer upon the board of directors a measure of discretion
as to when, where.and how such authority should be exercised;
and depending upon the particular facts presented they %     be
considered either permissive or mandatory. See Chisholm v.
Be;le; M;l;s,    supra. Also, the case of Prosper Independent
SC oo D s rict v. Collin County School Trustees, 51      w 2
     (Tex. Civ. App. 1932 ff c         A     9 s w 2d ;j;sh:uld
be noted as to the follokzg ~bs~%at%~           l*
              If
                  .Generally,the lodging of author-
                   . ,.

        ity in any designatedboard or form carries
        with it the right of such board or form to
        determine whether a proper case has arisen
        for the exercise of such power. . .'
       %~Itis,noted that while in this case a writ of error was
granted and the judgment of the Court of Civil Appeals was affirmed,
the opinion did not discuss the point under consideration.
        It is important to observe that a statutoryprovision may
be permissive as to some matters and mandatory as to others, as
pointed out in 50 American Jurisprudence39, Statutes, Section 18:
             "There are even provisions which have
        been regarded as mandatory when involved in
        some proceedings, and directory when involved
        in others, or mandatory under some circumstances
        and directory under other circumstances."
        Since we have been presented no facts or'circumstences,
our opinion cannot be construed as determiningthe proper charac-
terization of the statutoryprovisions under any and all circum-
stances or as applied to the facts of a particular case. The
question of the constructionof statutory provisions as they may
involved the "protection of third persons" must sometimes be
considered;also, whether any "substantialrights depend on com-
pliance with the particular provisions and no injury can result
from ignoring them," and whether "the legislative intent can be
accomplishedin a manner other thanthat prescribed with substan-
tially the same results." Such factors are sometimes a necessary
part of statutory constructionand must begapplied to the facts
                       See State v. Frisby, lo8 N.W. 2d 769, 773




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                                                                ._         ._




Honorable Bruce Gibson, Page 6,          (N-    688)




           mandatory provisions on the board of directors
           of credit union organizations.
                      Article 2461-12      b), Subsections (6                   ,

                                    (1   4 1,   (16),   (17)s        (18
                             of the above Act, depending
           upon‘?%-facts presented may be mandatory or-
           permissive provisions on the board of direc-
           tors of credit union organizations.
                3) A characterizationcannot be made under
           all facts and circumstances,and the facts and
           circumstanceswill sometlmes be determinativeof
           a particular statutory cons ruction.
                                    A
                                      s very truly,



                                                  ey General of Texas
Prepared by Ray McGregor
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Kerns Taylor, Chairman
W. E. Allen, Co-Chairman
Jim Swearingen
James Quick
Jack Goodman
Jack Sparks
MEADE F.    GRIFFIN
Staff Legal Assistant
AIFREDWAXER
Executive Assistant
NOLA WHITE
First Assistant



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