                       HEATTORNEY                           GENERAL
                                    OF     TEXAS
                              AUSTIN.       TEXAS           78711



                                    November           -?, 1969



Honorable    John H. Flinn                       Opinion     No.    M-503
District  Attorney
36th Judicial   District
Courthouse,     P. 0. Box 1112
Sinton,  Texas 78387                             Re:      Whether    a county depository
                                                          contract   may be assigned     by
                                                          a liquidator   of a defunct bank
                                                          to a successor    bank, and re-
Dear   Mr.    Flinn:                                      lated questions.

           By recent letter to this office you have requested                an opinion
from   this office concerning  captioned   matter. You state:

                     “The First State Bank of Aransas     Pass
             did not open its doors for business  on September     3,
             1969. Subsequently,    a new bank, chartered    under
             the laws of the State of Texas,  was opened in Aran-
             sas Pass with the name of First State Bank of Ar-
             ansas Pass,   Texas.

                      “A liquidator   of the Federal  Deposit In-
             surance Corporation      has obtained possession   of
             the assets of The First State Bank of Aransas        Pass
             and coyeyed     *em    to First State Bank of Aransas
             Pass / Texas     i, with no loss to any depositors    of
             the prior bank.

                     “I understand  that among the assets      so conveyed
             were the depository   contract   with San Patricia    County,
             the funds of the county deposited    with the prior bank
             under such depository    contract,   and the securities
             pledged to secure such funds. ”

             You ask,   specifically:




                                        -2411-
Honorable     John H. Flinn,        page   2            M-   503




                       “1.   Is a county depository  contract
            such     a contract    which may be assigned    by a
            liquidator     of a defunct bank to a successor
            bank?

                    “2.    Is the_successor     First State Bank
            of Aransas    Pass ITexas-       a county depository
            of San Patricia    County,    subject to the provisions
            of the depository    contract   of said county with the
            now defunct The First State Bank of Aransas
            Pass? ”

            Articles      2567 and 2569, Vernon’s         Civil Statutes, are the ap-
plicable    statutes     relating to the insolvency       of a county depository.   These
statutes    read:

                        “Article   2567.   Selection    of special    de-
            pository.

                     “When any bank, which is a county,               city or
            district   depository     of public funds under the laws of
            this State,    suspends business       or is taken charge of
            by the Comptroller        of the currency     or the Commission-
            er of Banking,      as the case may be, the lawful county,
            city or district    authorities,     authorized    to select the
            depository     in the first instance,      shall have the discre,-
            tion and authority      to select by contract      a special      de-
            pository    for the public funds in such suspended bank.
            Such special     depository     shall assume the payment of
            the amount of public funds due by the suspended bank
            on the date of its suspension,         including    interest     to that
            date, and shall pay the same to the lawfully              designated
            public authority      in accordance     with the contract        entered
            into by such special depository.            The contract       shall be
            for the performance         of the agreement      entered into be-
            tween the proper public authorities           designated       above,
            and the special     depository,      and shall require       the pay-
            ment of the deposit in such installments              as may be agreed
            upon, the last of which         shall be paid not exceeding           three
            years from the date of the contract.             The installments,          or




                                       -2412-
Honorable     John H. Flinn,       page   3            M-      503




            the amount due, may be evidenced               in the
            discretion     of the contracting      parties   by nego-
            tiable certificates       of deposit or cashier’s
            checks,     payable at specified       dates, if made a
            part of the contract.         The performance         of the
            contract     and the payment of funds described
            therein    shall be secured by bond, or by sever-
            al bonds in case of installments,            to be given by
            the special depository         with the same character
            of sureties     as is required     by regular      depository
            bonds.     The contracts       and bonds of special        de-
            positories     shall be approved       by the authority
            authorized     by law to approve       contracts     and bonds
            of regularly      selected   depositories.       The rate of
            interest    which funds placed in a special            depository
            hereunder      shall bear shall be fixed by the contract,
            or such funds may, in the discretion              of the con-
            tracting    parties,    be non-interest      bearing.     Acts
            1921, p. 68. ”

                     I’. . . .

                     “Art.    2569.    Selection    optional

                      “Nothing    in this chapter    shall require    the
            State, county,     city or district    authorities    to select
            any special depository        as herein permitted,       but
            they may proceed        by their lawful remedies        against
            the failed bank, if, in their discretion,          it is best for
            the public interest      so to do.   Id. ‘I

           Both of your questions,        therefore,      are answered   in the negative.
The statutes hereinabove         quoted clearly      provide   what course of action
County authorities      are to take in the event a county depository           fails under
the conditions    specified   in Article    2567.     You will note that in the selection
of a special   depository,     provisions    for notice of the contract      and bank ap-
plications   as is required     in the establishment        of county depositories    in the
first instance   are not made.




                                      -2413-
Honorable     John H.   Flinn,   page   4          M-   503




                                     SUMMARY

                     In the event a county depository        sus-
            pends business      or is taken charge of by the Comp-
            troller  of the Currency,      Coun ty authorities    are to
            be governed     by the provisions    of the Special   De-
            pository   Statute,   Articles  2567 and 2569, Vernon’s
            Civil Statutes.     A county depository      contract  is not
            assignable    by a liquidator   of a defunct bank to a
            successor     bank.   The successor     First State Bank
            of Aransas     Pass is therefore    not subject to the pro-
            visions   of the depository    contract  with the defunct
            bank which was the subject of the inquiry.




                                                         eneral   of Texas

Prepared     by Ray McGregor
Assistant    Attorney General

APPROVED:
OPINION   COMMITTEE

Kerns Taylor,       Chairman
George Kelton,       Vice-Chairman

Roy Mouer
Bill Allen
James Quick
Gordon Cass

Meade F. Griffin
Staff Legal Assistant

Nola    White
First   Assistant




                                     -2414-
