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                       The Attorney              General of Texas
                                             July     23,    1980
MARK WHITE
Attorney General



                   Honorable  WarrenG. Hard@                      Opinion No. MW-213
                   Treasurer of the State of Texas
                   L.B.J. Buildhg                                 Re: Whetherthe Comptroller may
                   Austin, Texas                                  initiate direct deposit procedures
                                                                  for payroll warrants by magnetic
                                                                  tape transfer service

                   Dear Mr. Hard&:

                         You have requested our opinion regard@ the direct deposit of payroll
                   warrants issued to state employees. The Comptroller has announced his
                   intention of initiating mqnetic tape transfer service to Austin banks for
                   direct depcsit of payroll warrantsissued to employees of his office. You ask
                   a number of questions regard@ this pmctice, and variations thereof.

                         Initially, we note that an indivi&al is at liberty to designate a bank as
                   his egent foc,eollection purposes. A bank is expressly empowered:

                                   to act as [aI fiscal egent or transfer agent and in
                               such Capacity to receive and disburse money and to
                               transfer registered and countersigned certificates of
                               stock, bands or other evidences of indebtedness.

                   Article 342-301(b), V.T.C.S. See Citizens National Bank of Dallas v. Hill,
                   505 S.W. 2d 246 (Tex. 1974). Furthermore, the bank, as agent, is empowered
                   to endorse the warrant on behalf of the indivi&al:

                                   An indorsement must be written b or on behalf of
                               the  holder and on the instrument   w on a paper 80
                               firmly affjxed thereto as to become a part thereof.

                   Section 3.202(b), Texas Business& Commerce Code.

                                  A signature may be made by an rgent or other
                               representative, and his authority to make it may be
                               established es in other cases of representation. No
                               particular form of appointment is necessary to
                               establish such authority.




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    ‘HonorableWarren G. Herding - Page Two        (Mw-213)



    Section 3.403(a), Texas Business & Commerce Code. Thus, the Comptroller would
    clearly be authorized, at the instruction of a state employee, to transfer the
    employee’s pay warrant directly to his designated bank. The bank, acting as the
    employee’s agent, would then deposit the warrantin his account.

         We also believe that article 4350, V.T.C.S., contemplates the issmce         of the
    warrantdirectly to the employee’s designated bank:

                   No warrant shall be issued to any person indebted or owing
               delinquent taxes to the State, or to his agent or assignee, until
               such debt or taxes are paid

    (Emphasis added). See aLso Acts 1979, 66th Legislature, chapter 843, at 2606,
    (Comptroller authorized  to transfer appropriationauthority and cash to reimburse cost
    of direct deposit of state employees’claims). At the direction of the employee, the
    Comptroller may issue the empIoyee’s pay warrant to his agent bank, and transfer the
    warrant directly to that bank.

          You next inquire about the issuance of a single pay warrant covering multiple
    employees, all of whom designate a particular bank as their depository. In our opinion,
    such a procedure would thwart the Comptroller’s ability to comply with various
    statutes. Article 4358, V.T.C.S., for example, requires that different classes of pay
    warrants be printed cn specific colors of paper and that the warrants be “serially
    numbered.” Certain information must be furnished cn the warrant, including
    designation of both the eppropriation and the fund from which the warrant is to be
    drawn, and the initials ofthe person in the Comptrollerk office compariw the warrant
    with the claim. Article 4365, V.T.C.S., ptovidw for the issuance of duplicate warrants
    in certain cases. We believe the thrust of these statutes is clear: The Comptroller
    must issue individual warrants to, or an behalf of, every employee receiving a salary.
    We note that your question and our response are restricted to the issuance of single
    paytoll warrants covering multiple employees. We do not suggest what result might
    attach to diff event fact situations.

          The transfer of payroll warrant information on megnetic tape would also pose
    problems regardirg the requirement of indivi&al warrants. In our opinion, articles
    4358 and 4365 contemplate not merely individual warrants but “warrants” within a
    rather vrow range of meaning. The use of serial numbering and colored paper, and
    the provision for &pIicates are not concepts readily applied to msgnetic tape. it is
    pcasible that the Comptroller might furnish the bank with a magnetic tape reflecting
    the information contained on the individualwarrantswritten for each employee, but be
    is not authorized to issue pay warrants by transfer  of information solely cn megnetic
    tape. Although the statute&es not contemplate the technological advances which
    would facilitate the processing of the state’s payroll, it must be amended by the
    Legislature if the state is to take complete advantage of avalable innovations.

          Finally, ycu ask about any liability you might incur by participating in any of the
    described practices. As we have indicated, a direct deposit procedure is not in itself in
    conflict with ~thestatute, so lcng as the warrants are i&%&ally issued and conform
    to the traditional concept of a “warrant.” If, however, the Treasurer participates in
    the issusnce of warrants by transfer of information on magnetic tape, or those
    covering multiple employees, we believe he might stiject himself to liability.



                                          p.   682,
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    Honorable Warren G. Harding - Page Three (NW-3131




          Article 4371, V.T.C.S., prohibits the payment of any money out of the Treasury
    “except cn the warrants of the Comptroller.” We believe such warrants must be valid
    on their face in order to avoid the statutory prohibition. If they fait prima facie to
    comply with statutory requirements, they are invalid, and the Treasurer may not rely
    on them as the basis for the payment of any money. In addition to liability on his bond,
    under article 6003b, V.T.C.S., the Treasurer might also be in violation of article 4388a,
    V.T.C.S., which provides:

                   Any person who shall knowingly and willfully violate any
               provision of this Act shall be deemed guiity of a misdemeanor,
               and won conviction, shall be punishedby a fine of not less than
               Fifty Dollars ($50.00) nor more than Five Hundred Dollars
               ($500.00) or by imprisonment in the county jail for not less than
               30 days nor more than six months, or by both such fins and
               imprisonment.

                                        SUMMARY

                     The Comptroller is authorized, at the instruction of a
               state employee, to transfer the employeek pay warrant directly
               to his designated bank for deposit in his account. Again, at the
               employee’s direction, the Comptroller may issue the employee’s
               pay warrant in the name of his sgent bank and transfer it
               directly to the bank. The Comptroller may not issue a pay
               warrant covering multiple employees, and hs may not issue
               warrantssolely by means of magnetic tape.

                                               h%3d?u*


                                                  MARK      WHITE
                                                  Attorney General of Texas
    JOHN W. FAINTER, JR.
    First Assistant Attorney General

    TED L. HARTLEY
    Executive Assistant Attorney General

     Prepared by Rick Gilpin
    ‘Assistant Attorney General

    APPROVED:
    OPINIONCGMMHTEE

    C. Robert Heath, Chairman
    Susan Garrison
    Paul Gavia
    Rick Gilpin
    Tom Pollan
    Mitch Winnick



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