                                              The Attorney             General of Texas
                                                                May 5, 1983
     JIM MATTOX
     Attorney General


                                             Honorable Warren New                  Opinion No. JM-29
     Supreme      Court Building
     I’ 0. Box 12546
                                             Yoakum County Attorney
     Austin.    TX. 76711. 2546              P. 0. Box 359                         Re:    Whether article 2529c,
     5121475-2501                            Plains, Texas   79355                 V.T.C.S., authorizes a city to
     Telex    910/8741367                                                          contract with a depository bank
     Telecopier      5121475-0266                                                  when a majority of the city
                                                                                   COUIlCil  members are    stock-
     1607 Main St., Suite 1400                                                     holders in the bank
     Dallas,   TX. 75201.4709
     2141742-6944                            Dear Mr. New:

     4624 Alberta      Ave.. Suite     160
                                                  You ask whether the city council of a general law city is
     El Paso, TX.      799052793             prohibited from entering into a depository contract with a bank when a
     915/533-3464                            majority of the city council members are stockholders in that
                                             depository bank. We conclude that, in the situation you describe, the
,-
                                             city council of a general law city is prohibited from entering into
       10 Dallas Ave.. Suite          202
     Housfon.   TX. 77002-6966
                                             such a contract.
     713/650-0666
                                                  You suggest that, by entering into the contract, the city council
                                             has violated articles 2529c and 988, V.T.C.S., as well as section
     606 Broadway,        Suite 312          39.01 of the Penal Code.      Article 2529c, V.T.C.S., governs the
     Lubbock.  TX.       79401-3479
                                             selection and qualification of depositories of state agencies and
     6061747-5236
                                             political subdivisions; it will be discussed later. Section 39.01 of
                                             the Penal Code provides that a public servant commits an offense if he
     4309 N. Tenth, Suite 6                  knowingly or intentionally engages in official misconduct. Because a
     McA,,en.    TX. 76501-1685              determination of whether section 39.01 has been violated in this
     5121682-4547
                                             instance necessarily requires the resolution of disputed matters of
                                             fact, we will not address that issue in this opinion.
     200 Main Plaza. Suite 400
     San Antonio,  TX. 76205.2797                 Article 2529c, V.T.C.S., governs the selection and qualification
     5121225-4191                            of depositories of state agencies and political subdivisions and
                                             provides at section 2 the following in pertinent part:
     An Equal       Opportunity/
     Affirmative      Action     Employer                 A bank shall not be disqualified from bidding
                                                       and becoming the depository for any agency or
                                                       political subdivision of the state by reason of
                                                       having one or more officers, directors or stock-
                                                       holders of said bank who individually or collecti-
                                                       vely own or have a beneficial interest in not more
                                                       than 10 percent of the bank's outstanding capital
                                                       stock, and at the same time serves as a member of
                                                       the board, commission, or other body charged by
                                                       law with the duty of selecting the depository of
                                                       such state agency or political subdivision;


                                                                      p. 126
Honorable Warren New - Page 2 (JM-29)




         provided, however, that said bank must be selected
         as the depository by a majority vote of the
         members of the board, commission, or other body of
         such agency or political subdivision and no member
         thereof who is an officer, director or stockholder
         of the bank shall vote or participate in the
         proceedings. (Emphasis added).

     The statute requires that a depository bank be selected by the
vote of a majority of board members. All stockholders in a bank are
disqualified from voting in favor of it. On the facts you present, a
majority of the council members were disqualified from voting to
choose as depository the bank in which they owned stock. Thus, the
action taken by the city council members is manifestly in violation of
the statute.

     We therefore conclude that the city council of a general law city
is prohibited by article 2529c,     V.T.C.S.,  from entering into a
depository contract with a bank when a majority of the city council
members are stockholders in that bank.

                              SUMMARY

            The city council of a general law city is
         prohibited by article 2529c, V.T.C.S., from
         entering into a depository contract with a bank
         when a majority of the city council members are
         stockholders in that bank.




                                         JIM     MATTOX
                                         Attorney General of Texas

TOM GREEN
First Assistant Attorney General

DAVID R. RICHARDS
Executive Assistant Attorney General

Prepared by Jim Moellinger
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Jim Moellinger
Charmaine Rhodes
Nancy Sutton

                                p. 127
