Untitled Texas Attorney General Opinion ( 1990 )

April 23, 1990
Honorable Tim Curry Opinion No. JM-1162
Criminal District Attorney
200 West Belknap Street Re: Status of trust funds
Fort Worth, Texas 76196-0201 held by a district clerk
(RQ-1816)
Dear Mr. Curry:
You ask seven questions about a district clerk's duty
in
.. regard
_ to funds held in trust by him until final disposi-
tion oy a coun . Your first question is "What funds are
included within the definition of 'trust funds' in chapter
117 of the Local Government Code?"
This office has previously answered this question in
Attorney General Opinion H-183 (1973). That opinion con-
sidered the definition of a "trust fund" for purposes of
article 2558A, V.T.C.S. (now found at chapter 117, Local
Government Code).
We stated:
A trust is an equitable obligation under
which the trustee is required to deal with
the trust property for the benefit of the
beneficiaries who have a vested interest in
the trust funds. Any funds fitting this
definition are trust funds and, if in the
possession of the county or district clerk,
may be deposited in the county depository for
tNSt funds.
. . . .
We believe that any money deposited in court
to satisfy the result of a legal proceeding
or to await the result of a legal pro-
ceeding falls within the scope of 5 11 (now,
55 117.052, 117.053, Local Government Code).
Attorney General Opinion H-183 (1973) at 846, 848.
Honorable Tim Curry - Page 2 (JM-1162)
That opinion determined that civil court deposits,
probate court deposits, and child support payments paid
through the clerk's office would be classified as trust
funds. You ask specifically about interpleader funds,
supercedeas deposits, funds paid in satisfaction of
judgments, cash bonds, minor#s trust funds, and deposits in
eminent domain proceedings.
Interpleader funds are, of course, deposited in a court
to await the court's determination of ownership. Thus,
interpleader funds are included in the scope of chapter 117.
m Sellers v. wis County, 483 S.W.ld 242 (Tex. 1972).
Similarly, supercedeas deposits are paid to suspend the
execution of a judgment pending appeal, which is also a
legal proceeding and thus within chapter 117 of the Local
Government Code. &G Saena r v. Pro kG 232 S.W.2d 106
(Tex. Civ. App. - Austin 195:, writ refsd):
Funds paid in satisfaction of judgments are paid as the
result of a legal proceeding, and as stated in Attorney
General Opinion H-183, those funds are included within the
chapter 117 provisions of the Local Government Code. We
note that funds paid in satisfaction of a judgment may not
be paid into court without the order of the court. Iowa
Mtu, 313 S.W.2d 897 (Tex. App. -
l-ks~on l&8): Texas & P.R. Co. v. Walk=, 57 S-W: 568 (Tex.
1900).
You ask about wcash bonds," which we understand to be
cash deposited in lieu of bonds. These funds are, we think,
generally of the same nature as interpleader funds and
supercedeas deposits and, thus, fall within chapter 117 of
the Local Government Code. See. e.o., Rules App. Proc. Rule
46(b).
We find no statutory provisions relating to %inor ‘5
trust funds." However, under the terms of chapter 142 of
the Property Code, funds awarded to a minor or an incapaci-
tated person who has no legal guardian are paid into the
registry of court. mber v. Southern Nat'1 Life Ins. Co,,
326 S.W.2d 715 (Tex. Civ. ADD. - San Antonio 1959, writ
ref'd). These trust funds &e also within the scope of
chapter 117 of the Local Government Code. Any funds
deposited with the clerk under this chapter are deposited
under court order and may be invested for the benefit of the
minor by order of the court. Prop. Code 5 142.004. See
McClendon v. aa a , 6 S.W.2d 796-(Tex. Civ. App. - Waco
1928, writ dism'd).
Eminent domain proceedings are also "legal pro-
ceedings," and cash deposited to reimburse a property owner
Honorable Tim Curry - Page 3 (JM-1162)
is generally included in chapter 117 of the Local Government
Code. &? fitv of San &&nio v. Bura 65 S.W.2d 408 (Tex.
Civ. App. - San Antonio 1933, no wgit). However, the
condemnor of real property may, under section 21.021(d),
direct that the eminent domain deposit be placed in an
account of its own choosing.
Your second through fifth questions regard the neces-
sity of depositing trust funds in separate accounts or
interest bearing accounts. Chapter 117 of the Local Goven-
ment Code contains no express requirements that funds
deposited in a court be placed either in separate accounts
or in interest bearing accounts. Of course, the first duty
of the clerk is to follow the instructions of the court that
directed him to hold the funds. &8 WcLennan Co. v. Amer,
at'1 Ins. Co,, 457 S.W.2d 597 (Tex. Civ. App. - Wad.0 1970,
writ ref*d n.r.e.). We note that the county commissioners
court and the county auditor have some discretionary
authority regarding funds held by the clerk for the benefit
of others. The exercise of that authority could invest the
clerk with additional duties in regard to those funds.
Section 112.002 of the Local Government Code permits a
county auditor to require certain accounting procedures in
regard to trust funds. As we noted in Attorney General
Opinion H-183 (1973), "[t]he sheriff, district clerk and
county clerk must deposit funds under procedures established
by the county auditor." Conceivably, the county auditor
could require that trust funds be placed in separate
accounts "for the speedy and proper collecting, checking,
and accounting" of the funds.
Similarly, section 117.051 permits the county commis-
sioners court to require that funds held in trust be placed
in time deposits. As it applies to county depositories, the
term "time deposit" is defined simply as
a deposit of funds subject to a contract
between the depositor and the depository
under which the depositor may not withdraw
any of the funds by check or by another
manner until the expiration of a certain
period following written notice of the
depositor's intent to withdraw the funds.
Local Gov't Code 5 116.001(3). "Time depositO'is treated
elsewhere as the equivalent of a savings account in a
commercial bank and is defined by other authorities to mean,
among other things, "cash in a bank earning interest."
Black's Law Dictionary 1330 (5th ed. 1979). See also
Attorney General Opinion M-468 (1969). The legislature,
furthermore, anticipated that trust funds placed in time
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Honorable Tim Curry - Page 4 (JM-1162)
deposits would earn interest. m Local Gov*t Code § 117.054
(discussed below). A requirement that funds be placed in a
"time deposit" would, we think, be a requirement that the
funds generate interest.
you have indicated that in Tarrant County the commis-
sioners court has not required that trust funds be left in
time deposits under section 117.051 and that the county
auditor has not promulgated regulations under section
112.002 regarding the deposit of such funds. We find no
requirement in chapter 117 that trust funds either collect
interest or that they be deposited in separate accounts. &S
Esrris Co. Wm 507 S.W.2d 848 (Civ. App. - Houston
[14th Dist.; 1974, writ'ref'd n.r.e.). Nor do we find any
such requirements in the statutes relating.fo the specific
types of funds about which you ask. Thus, we believe that
the clerk of court has no duty to deposit such funds in
separate accounts or in interest bearing accounts, except as
such duty may be imposed by the court or other authority.
Our conclusion is buttressed by the fact that statutes that
delineate the liability of county and district clerks in
regard to their handling of trust funds deposited in court
do not identify the failure to deposit in separate accounts
or in interest bearing accounts as a source of liability for
the clerks. Local Gov't Code 9s 117.081, 117.082: Civ.
Prac. 61Rem. Code 5 7.002.
In your sixth question you ask:
Does the county have the right to receive any
interest accrued on any funds maintained by
the District Clerk (&, is S 117.054 of the
Local Government Code constitutional)?
Section 117.054 provides the following:
(a) A county is entitled to receive a
part of the interest earned on trust funds
placed in time deposits under Section
117.051. The amount received by the county
must be reasonably related to the accounting
and administrative expenses incurred by the
county in handling the funds.
(b) The county auditor on behalf of the
commissioners court or, if there is no county
auditor, the county treasurer, shall deposit
the amount of compensation in the general
fund of the county.
Section 117.054 is derived from sections 4a and 4b of
former article 2558a, V.T.C.S. Prior to recodification as
p. 6137
Honorable Tim Curry - Page 5 (JM-1162)
part of the Local Government Code, section 4a of article
2558a directed the commissioners court to receive all
interest earned on the time deposits of trust funds and to
deposit such interest in the general fund of the county "as
an offset to the expenses of handling such trust funds for
the benefit of litigants." Section 4b authorized the same
with respect to accumulated interest derived from trust
funds in the custody of the district or county clerk prior
to the enactment of section 4a in 1959. These provisions
were declared unconstitutional by the Texas Supreme Court in
Sellers v. Harris Co, 483 S.W.Zd 242 (Tex. 1972). The
court held that the' statute violated the due process
guarantees of the state and federal constitutions because
it deprived the owner of the trust funds of a sum that was
not reasonably related to the value of the county's services
funds. See also Webb's
(1980)
(county's taking of interest ac&iny& ~&$~der fund
deposited with court clerk in addition to fee charged for
clerk's services violated Fifth and Fourteenth Amendments of
U.S. Constitution). United
m, 110 S. Ct. 387,%689) (user fee need note be
precisely calibrated to the benefit received from govern-
mental services).
The revisor's note to section 117.054 states that the
Sell rs opinion indicated that article 2558a was unconstitu-
tionzl only to the extent that it deprives a person of due
process and was still operable so long as the county
received an amount reasonably related to the value of the
county's services. The note cites Attorney General Opinion
M-1198 (1972) as support for this reading of Sm.
Section 117.054, it is noted, was drafted to reflect the
interpretation of article 2558a in Sellers.
With the constitutional infirmities of article 2558a
removed, section 117.054 authorizes the county to receive an
amount of the interest earned on trust funds that is
reasonably related to the accounting and administrative
expenses incurred by the county in the handling of the
funds. However, as you note in your brief, section 117.054
must be read in conjunction with section 117.055 of the
Local Government Code. The latter section provides:
(a) To compensate the county for the
accounting and administrative expenses
incurred in handling the trust funds for the
benefit of litigants in civil proceedings,
the county may collect from the nonprevailing
party in the litigation or from the party the
court designates a fee in an amount set by
C the commissioners court, but not to exceed
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Honorable Tim Curry - Page 6 (JM-1162)
$50. The fee is in addition to any fees the
district clerk collects as authorized by
statute or court order.
(b) The county treasurer shall deposit
the fee in the general fund of the county.
Local Gov't Code 5 117.055 (as amended by Acts 1989, 71st
Leg., ch. 1, 8 16, at 16).
On first reading, sections 117.054 and 117.055 appear
to create a conflict. Section 117.054, on the one hand,
authorizes a county to collect from accrued interest on
trust funds an aXCu’k "reasonably related" to the county's
uaccounting and administrative expenses ,I while section
117.055 appears to limit the county's charge for lqaccounting
and administrative expensesu to an amount not to exceed $50.
We do not believe there is any conflict between the two
sections. Nor do we believe that the county is authorized
to assess two charges for the same "accounting and adminis-
trative expenses." Rather, we can read the two statutes
together by noting that the charge authorized by section
117.054 is limited to those funds deposited in time
deposits as ordered by the commissioners court under
section 117.051. With this reading, we avoid the constitu-
tional problems found in Sellers, and in w's Fabulous
. Furthermore, we give effect to both statutes.
As noted above, the Tarrant County Commissioners Court
has not mandated that trust funds be deposited in time
deposits under section 117.051. Thus, we believe that in
Tarrant County, section 117.055 is the operative law for the
assessment of fees for handling trust funds for the benefit
of litigants. Of course, under that statute, it remains for
the commissioners court to designate the fees.
Finally, you ask:
Can the District Clerk pass costs of estab-
lishing and maintaining trust funds back to
litigating parties when the funds are paid
out?
As noted above, the supreme courts of both Texas and
the United States have implied that a county may collect
a fee reasonably related to the costs of depositing and
accounting for funds that are held in trust for others. m
sellers, si!mza: tSl+U233*
Section 117.054 of the Local Government Code entitles
the county to receive a part of the interest aCCNed on time
p. 6139
Honorable Tim Curry - Page 7 (JM-1162)
deposits, and section 117.055 (as amended by Acts 1989, 71st
Leg., ch. 1, f 16, at 16) allows the collection of a fee not
to exceed $50 for handling trust funds for the benefit of
litigants in civil proceedings. As we determined in
Attorney General Opinion JH-434 t-861, the expense of
handling the trust fund must have been incurred prior to the
assessment of cost, which cannot be done until the outcome
of the litigation. Attorney General Opinion JM-434 (1986).
SUMMARY
The trust funds included in chapter 117 of
the Local Government Code include, m
u, civil court deposits, probate court
deposits, child support payments paid through
the clerk's office, interpleader funds,
supercedeas deposits, funds paid in satisfac-
tion of judgments, other cash deposits made
in lieu of bonds, minor's trust funds, and
eminent domain deposits. The district clerk
is not required to invest these funds for
interest or to deposit them in separate
accounts unless so ordered by the court or
other authority. The costs of establishing
and maintaining these trust funds are
properly assessed against the party that
ultimately receives them or as directed by
the court at the time the funds are paid to
the owner.
MATTOX
Attorney General of Texas
MARYNELLRR
First Assistant Attorney General
JUDGE ZOLLIE STHAHLEY
Special Assistant Attorney~General
RENEA HICKS
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
Prepared by Karen C. Gladney
Assistant Attorney General
p. 6140