                                    September     15,     1975



The Honorable    Kenneth D. Gaver,    M. D.               Opinion   No.   H- 691
Commissioner
Texas Department      of Mental Health and                Re: Ability   of Mental Health and
     Mental Retardation                                   Mental Retardation       Patient    Benefit
Box 12668, Capitol Station                                Fund to borrow     money against
Austin,   Texas   78711                                   collateral  of certificates      of deposit
                                                          in which the Fund is invested.

Dear   Dr.      Gaver:

         You have requested     our opinion concerning        whether   the trustee of the
Patient   Benefit Fund may, after placing the money in the Fhnd in certificates
of deposit,   pledge such certificates    as collateral     for loans.    You explain that the
Benefit Fund is maintained      primarily   in certificates     of deposit in order to
maximize     the earnings  of the Fund.    When it becom,es necessary           to make
unexpected    expenditures   from the Fund, it is financially        preferable    to obtain a
loan   rather     than redeem   a certificate    before    its date of maturity.

           The Patient    Benefit Fund is created   in article   3 183c, V. T. C. S. It
may be expended        “for the education  or entertainment     of the inmates   of the
institution,   or for the actual expense     of maintaining    the fund at the institution.             ”
Sec. 1.

         Assuming   the trustee’s    action is prudent under the standard         set in
article  742513-46, V. T. C. S., we see no meaningful        distinction    in this case
between the direct expenditure       of money from the Fund and the use of the Fund
as collateral  for a loan, where the proceeds       of the loan are used for a purpose
for which money from the Fund may be legally           expended.      Accordingly,     we
answer you question     in the affirmative.




                                           p.   3003
The Honorable   Kenneth    D. Gaver,     M. D.   - page   2    (H-691)




                                  SUMMARY

                Provided    the action is prudent under the standard
                set in article   742513-46, V. T. C. S., the trustee    of
                the Patient    Benefit Fund may use certificates     of
                deposit as collateral    for a loan where the proceeds
                of the loan are used for a purpose for which money
                in the Fund may be legally      expended.



                                                 j-Jzji&
                                                    Attorney     General   of Texas




DAVID   M.   KENDALL,     First   Assistant




C. ROBERT   HEATH,        Chairman
Opinion Committee

jwb




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