Untitled Texas Attorney General Opinion ( 1975 )

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 p. 3004