                              The Attorney General of Texas
                                                   t+nmber 14, 1980
    MARK WHITE
    Attorney General

                          Honorable Kenneth Ii. Ashworth          Opinion No. H-272
                          Coordinatiq Board
                          Texas College & UniversitySystem        Re: Whether a commtmitycollege
                          P. 0. Box 12788, Capitol Station        may deposit ftmds in a aav@s and
                          Austin, Texas 787R                      loan institution when a member of
                                                                  the board of trustees is a stock
                                                                  holder,    officer,  director  OF
                                                                  employee of the savhgs & loan.

                          Dear Mr. Ashworth:

                                Ycu have requested our opinion as to whether a commtmity college
                          district may depceit ftmds in a savings and loan ‘association if a member of
                          the district’s board of trustees is a stockholder, offioer, director (r
                          employee of the saviqs and loan.

                                Section 130.084 of the Education Code provides that the board of
                          trustees of a community college district is to be governed:

                                     . . .by the general law governing the establishment,
                                     management      wd    control of independent school
                                     districts insofar as the general law is applicable,

                                Section 23.74 of the Education Code requires that a Qchool
                          depository” shall be a bank located in the State of Texas. In a series of
                          opinions from this off&-it    bus been determined that savirgs and loan
                          associations do mt qualify as depositories for politicel s~divisicns without
                          statutory authorization. See Attorney General Opinions H-1013fl977); H-
                          723 (1975X M-22 0967).     -
/
    A”Equaloppaiunily,         Specifically, the statutory terms %ank, bankirg corporation,
1   A”iml.,iW   Employer association cr indivi&al banker” have been determined not to include
            ARion
                         savirgs and loan associations. It would seem clear that the ssme rationale
!                        applies to the section 23.74 requirement that a school depository must be a
                          bank.
I                               The caption to Senate Bill 1195,Acts 1979, 66th Legislature, chapter
                          829, at 2167,indicates that the hsgislature bs &awn a clear distinction
                          between the placirg of school funds in a “depository” and the “investment”
                          of such funds. Since using a savings and loan association as a depository is




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Honorable Kenneth H. Ashworth - Page Two          (W-272)




not authorized, the question remains whether the placement of funds within a savings
and loan is a proper investment, rather than depaait, of college frnda

      Section 23.80 of the Education Code, amended in l979, provides:

               The school district shall have the right to provide in its bid
           blank for the ri@ to place cn time deposits with savings and
           loan institutions located within the State of Texas on ftmds
           that are fully insured by the Federal Savitgs and Loan2 urance
           Corporation, but no district may place cn deposit with any
           savirgs and loan institution any bond or certificate of indebted-
           ness proceeds as provided by section 20.42 of this code. The
           school district is entitled to invest any and all of its funds in
           direct debt securities of the United States of America or other
           types of bonds, securities, warrants, etc., which the district is
           authorized by law to invest in. No depository bank selected
           under this subchapter may be compellea without its consent to
           accept on tim,e deposit any bond proceeds mulersection 20.42 of
           this code, but a depository shall be permitted to offer a bid of
           interest equaliig the highest bid of Interest for the time deposit
           of the bend proceeds tendered by another bank. If the
            depository bank equals the bid, it is entitled to receive the band
           proceeds on time deposit.

(Emphasis addedh In our opinion, this statute &es not furnish affirmative authority
for the investment of funds in a savings and lean association. Whereas a district “is
entitled to Invest . . in direct debt securities of the United States. . . or other types
of bards, securities, warrants, etc., ” the only authority conferred by section 23.80 with
regard to saviqs and loan institutions is the reservation of a right of investment in
such institutions vis a vis the district’s depaPitory bank. We believe that this provision
should be construed as enticipatory legislation, to the effect that, if the legislature
stisequently permits Investments in aavws and loan associaticns, a district will be
protected against an allegation by its depository bank that such investments
unconstitutionally impair the obligation of contracts. E Attorney General Opinion
H-723 (l975L

     The history of state depository laws indicates that the legislative Intent would
not be properly applied lq construction of section 23.80 to allow ftmds to be placed
within a savings and loan association as investments rather than deposits. In Lawson v.
Baker,220 S.W. 260,269 (Tex. Civ. App. - Austin 1920,no writ) the court noted that:

               . . .the general deposit& of money in a bank or depository,
            with or without interest, stiject to the check op demand of the
            depositor, is not a losn cr investment. The basis of distinction
            recognized in these cases is that a loan is for the benefit of the
            borrower, and cannot be withdrawn until the same becomes due,
            at the time fixed in the contract, which is usually some time




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    Honorable Kenneth H. Ashworth - Page TIrea (H-272)




               certain. On the other hand, a deposit is for tha benefit of the
               depceitor primarily, and, while it is true that the relation of
               debtor and creditor results, it is not necessarily a loan, If the
               money is to remain.on depceit fa a fixed period, dum which
               time the depceitor has ID right to Qmand the return of the
               money, the transaction may be regarded as in all stistantial
               respects a loan, but if the deposit is not for a time certain, but
               the money must be returned lpce demand of the depceitor, the
               transaction amnot, in any ploper sense, be regarded as a loan.

          This view is strengthened by the legislative history of section 23.80. The
    committee indicated that the following were lqally permissible investments by a
    school district: water district bonds, mroricipalbonds, school bends, city and county
    bonds, treasury notes and all federal paper guaranteedby the federal government. No
    reference was made to investments in a saviqs and loan association. In our opinion,
    then, section 23.80 does not directly authorize a commtmity college district to invest
    its funds in any sav@s and loan association, regardless of whether a member of the
    district% baard of trustees is or is not a stockholder, officer, director or employee of
    the savirrgsand loan.

                                        SUMMARY

                   A community college district is not authorized to invest its
               funds in any savings and lean association, regardless of whether
               a member of the districtg board of trustees is or is not a
               stockholder, officer, director op employee of the savixs and
               loan.




                                              x4
                                                   MARK      WHITE
                                                   Attorney General of Texas

    JOHN W. PAINTER,JR.
    First Assistant Attorney General

    Prepared by Rick Gilpin & Mitch Winnick
    Assistant Attorneys General




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Hononrble Kenneth H. A&worth - Pege Pour   (M-272)




APPROVED:
OPINIONCOWMIITEE

C. Robert Heath,Cldrman
Jon Bible
Rick Gilpin
Tom Pollen
Mitch Winnick
Bruce Youngblood




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