By Ellis                                        S.B. No. 1304

      75R4619 CAG-F                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to funds tendered into the registry of the court.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Section 117.001, Local Government Code, is

 1-5     amended to read as follows:

 1-6           Sec. 117.001.  DEFINITIONS.  In this chapter: [,]

 1-7                 (1)  "Bank [bank]" means a banking corporation or

 1-8     association, an individual banker, or a state or federal savings

 1-9     and loan association or savings bank.

1-10                 (2)  "Clerk" means a county clerk, a district clerk, or

1-11     a county and district clerk.

1-12                 (3)  "Registry funds" means funds tendered to the clerk

1-13     for deposit into the registry of the court.

1-14                 (4)  "Separate account" means funds transferred from a

1-15     special account into a separate interest-bearing account.

1-16                 (5)  "Special account" means an account in a depository

1-17     in which registry funds are placed.

1-18           SECTION 2.  Section 117.002, Local Government Code, is

1-19     amended to read as follows:

1-20           Sec. 117.002.  TRANSFER OF UNCLAIMED FUNDS TO STATE

1-21     TREASURER.  Any funds deposited under this chapter, except cash

1-22     bail bonds, that are presumed abandoned under Chapter 72, 73, or

1-23     75, Property Code, shall be reported and delivered by the county or

1-24     district clerk to the state treasurer without further action by any

 2-1     court.  The dormancy period for funds deposited under this chapter

 2-2     begins on the later of:

 2-3                 (1)  the date of entry of final judgment or order of

 2-4     dismissal in the action in which the funds were deposited;

 2-5                 (2)  the 18th birthday of the minor for whom the funds

 2-6     were deposited; or

 2-7                 (3)  a reasonable date established by rule by the state

 2-8     treasurer to promote the public interest in disposing of unclaimed

 2-9     funds.

2-10           SECTION 3.  Sections 117.021(a) and (c), Local Government

2-11     Code, are amended to read as follows:

2-12           (a)  The commissioners court of a county at its May regular

2-13     term after a general election for state and county officers shall

2-14     receive an application from a federally insured [any] bank or banks

2-15     in the county to be the depository for a special account [trust

2-16     funds] held by the county clerk and the district clerks.  The

2-17     county shall contract with a federally insured bank or banks under

2-18     this section for a two-year or four-year contract term. The

2-19     contract may, if the clerk elects, include a provision that the

2-20     funds in a special account earn interest.  A clerk's election that

2-21     an account earn interest must be made, in writing, to the

2-22     commissioners court not later than the 30th day before the date the

2-23     county gives notice under Section 117.022 and shall be entered in

2-24     the minutes of the court.

2-25           (c)  A bank must file its application on or before 10 a.m. on

2-26     the first day of the term.  The application must be accompanied by

2-27     a certified check or cashier's check for at least one-half of one

 3-1     percent of the average daily balance of the registry [trust] funds

 3-2     held by the county clerk and the district clerk [clerks] during the

 3-3     preceding calendar year, as determined by the county clerk and the

 3-4     district clerk on or before the 10th day before the date the

 3-5     application is required to be filed.  A certified check or

 3-6     cashier's check that complies with this section is a good-faith

 3-7     guarantee on the part of the applicant that if its application is

 3-8     accepted it will execute the bond required under this subchapter.

 3-9     If the bank selected as depository does not provide the bond, the

3-10     county shall retain the amount of the check as liquidated damages

3-11     and the county shall select another depository as provided by this

3-12     subchapter.

3-13           SECTION 4.  Section 117.022, Local Government Code, is

3-14     amended to read as follows:

3-15           Sec. 117.022.  NOTICE [NOT REQUIRED].  A county shall [is not

3-16     required to] advertise or give notice that the county will accept

3-17     applications to be the depository for registry [trust] funds held

3-18     by the county clerk and the district clerks in the same manner as

3-19     notice is required under Section 116.022.

3-20           SECTION 5.  Section 117.023(a), Local Government Code, is

3-21     amended to read as follows:

3-22           (a)  At 10 a.m. on the first day of each term at which the

3-23     commissioners court is required to receive applications to serve as

3-24     the depository for registry [trust] funds held by the county clerk

3-25     and the district clerks, the commissioners court shall enter the

3-26     applications in the minutes of the court and select a depository.

3-27           SECTION 6.  Section 117.025, Local Government Code, is

 4-1     amended to read as follows:

 4-2           Sec. 117.025.  DESIGNATION OF DEPOSITORY.  (a)  After a bank

 4-3     selected to be a depository under this subchapter qualifies under

 4-4     Section 117.024 and is selected by the commissioners court, the

 4-5     commissioners court shall by an order entered in its minutes

 4-6     designate the bank or banks as the depository for the registry

 4-7     [trust] funds.

 4-8           (b)  A designation under Subsection (a) is effective until

 4-9     the designation and qualification of a successor depository or

4-10     until April 15 following the term in which a depository must be

4-11     selected under this subchapter, whichever is earlier.  If the term

4-12     of a depository ends before the designation and qualification of a

4-13     successor, the depository shall pay to the clerk in whose name the

4-14     account is carried all registry [trust] funds due or on deposit.

4-15           (c)  A designated depository shall provide security for the

4-16     funds deposited into the registry fund accounts in the same manner

4-17     as Subchapter C, Chapter 116.

4-18           SECTION 7.  Section 117.026(a), Local Government Code, is

4-19     amended to read as follows:

4-20           (a)  The commissioners court may select a federally insured

4-21     bank or banks located outside the county to serve as the depository

4-22     under this subchapter if:

4-23                 (1)  for any reason no bank located in the county

4-24     applies to be designated as the depository;

4-25                 (2)  an application is not made for the entire amount

4-26     of the registry [trust] funds;

4-27                 (3)  the commissioners court rejects all the

 5-1     applications submitted;

 5-2                 (4)  a depository selected by the commissioners court

 5-3     fails to qualify;

 5-4                 (5)  a depository becomes insolvent; or

 5-5                 (6)  a new depository is selected because of the

 5-6     failure of the regular depository to execute a new bond under

 5-7     Section 117.057.

 5-8           SECTION 8.  Section 117.027, Local Government Code, is

 5-9     amended to read as follows:

5-10           Sec. 117.027.  FAILURE TO SELECT DEPOSITORY.  If the

5-11     commissioners court has not selected a depository under this

5-12     subchapter, a clerk holding money, an evidence of debt, an

5-13     instrument of writing, or any other article deposited into [in] the

5-14     registry of the [clerk's] court pending the result of a legal

5-15     proceeding shall seal the article in a secure package and deposit

5-16     the package in an iron safe or a bank vault.

5-17           SECTION 9.  Subchapter B, Chapter 117, Local Government Code,

5-18     is amended by adding Section 117.028 to read as follows:

5-19           Sec. 117.028.  APPLICATION OF COUNTY DEPOSITORY LAW.  Except

5-20     as otherwise expressly stated, the provisions of Chapter 116

5-21     relating to county depositories also apply to a depository selected

5-22     under this chapter.

5-23           SECTION 10.  Section 117.052, Local Government Code, is

5-24     amended to read as follows:

5-25           Sec. 117.052.  DEPOSITS OF REGISTRY [TRUST] FUNDS BY COUNTY

5-26     AND DISTRICT CLERKS.  (a)  If a depository has been selected under

5-27     Subchapter B, a county clerk or a district clerk who is to have for

 6-1     more than three days legal custody of money deposited in the

 6-2     registry of the court pending the result of a legal proceeding

 6-3     shall deposit the money in the depository.

 6-4           (b)  The funds deposited shall be carried at the depository

 6-5     selected under this chapter as a special [trust fund] account in

 6-6     the name of the clerk making the deposit.

 6-7           (c)  A clerk is responsible for funds deposited into the

 6-8     registry fund from the following sources:

 6-9                 (1)  funds of minors, lunatics, idiots, or persons

6-10     determined to be non compos mentis;

6-11                 (2)  funds tendered in an interpleader action;

6-12                 (3)  funds paid in satisfaction of a judgment;

6-13                 (4)  child support funds held for more than three days;

6-14                 (5)  cash bonds;

6-15                 (6)  cash bail bonds;

6-16                 (7)  funds in an eminent domain proceeding; and

6-17                 (8)  any other funds tendered to the clerk for deposit

6-18     into the registry of the court.

6-19           SECTION 11.  Subchapter C, Chapter 117, Local Government

6-20     Code, is amended by adding Section 117.0521 to read as follows:

6-21           Sec. 117.0521.  CUSTODIANSHIP.  A clerk shall act only in a

6-22     custodial capacity in relation to a registry fund, a special

6-23     account, or a separate account.  A clerk is not a trustee for the

6-24     beneficial owner and does not assume the duties, obligations, or

6-25     liabilities of a trustee for a beneficial owner.

6-26           SECTION 12.  Section 117.053, Local Government Code, is

6-27     amended to read as follows:

 7-1           Sec. 117.053.  WITHDRAWAL OF FUNDS.  (a)  If a commissioners

 7-2     court selects a new depository under Subchapter B, when the

 7-3     depository qualifies, the county clerk and the district clerks

 7-4     shall transfer the funds in a special account [trust funds] from

 7-5     the old depository to the new depository, and the clerks may draw

 7-6     checks on the accounts for this purpose.

 7-7           (b)  Except as provided by Subsection (a), a clerk may not

 7-8     draw a check on special account [trust] funds held by a depository

 7-9     except to pay a person entitled to the funds.  The payment must be

7-10     made under an order of the court of proper jurisdiction in which

7-11     the funds were deposited except that an appeal bond shall be paid

7-12     without a written order of the court on receipt of mandate or

7-13     dismissal and funds deposited under Section 887, Texas Probate

7-14     Code, may be paid without a written order of the court.  The clerk

7-15     shall place on the check the style and number of the proceeding in

7-16     which the money was deposited with the clerk.

7-17           (c)  The clerk shall transfer any registry funds into a

7-18     separate account when directed to by a written order of a court of

7-19     proper jurisdiction or when the clerk is required to under Section

7-20     887, Texas Probate Code.  The clerk shall transfer the funds into a

7-21     separate account in:

7-22                 (1)  interest-bearing deposits in a financial

7-23     institution doing business in this state that is insured by the

7-24     Federal Deposit Insurance Corporation;

7-25                 (2)  United States treasury bills;

7-26                 (3)  an eligible inter-local investment pool that meets

7-27     the requirements of Sections 2256.016, 2256.017, and 2256.019,

 8-1     Government Code; or

 8-2                 (4)  a no-load money market mutual fund, if the fund:

 8-3                       (A)  is regulated by the Securities and Exchange

 8-4     Commission;

 8-5                       (B)  has a dollar weighted average stated

 8-6     maturity of 90 days or fewer; and

 8-7                       (C)  includes in its investment objectives the

 8-8     maintenance of a stable net asset value of $1 for each share [A

 8-9     depository shall release funds placed in time deposits under

8-10     Section 117.051 if the funds are required before maturity, but the

8-11     depository is not liable for interest earned on the amount

8-12     withdrawn].

8-13           SECTION 13.  Section 117.054, Local Government Code, is

8-14     amended to read as follows:

8-15           Sec. 117.054.  COUNTY EXPENSES PAID FROM INTEREST [ON TIME

8-16     DEPOSITS].  (a)  If a special or separate account earns interest,

8-17     the clerk, at the time of withdrawal, shall pay in a manner

8-18     directed by a court with proper jurisdiction the original amount

8-19     deposited into the registry of the court and any interest credited

8-20     to the account in the manner calculated in Subsection (b) [A county

8-21     is entitled to receive a part of the interest earned on trust funds

8-22     placed in time deposits under Section 117.051.  The amount received

8-23     by the county must be reasonably related to the accounting and

8-24     administrative expenses incurred by the county in handling the

8-25     funds].

8-26           (b)  The interest earned on a special account or a separate

8-27     account shall be paid in the following amounts:

 9-1                 (1)  10 percent of the interest shall be paid to the

 9-2     general fund of the county to compensate the county for the

 9-3     accounting and administrative expenses of maintaining the account;

 9-4     and

 9-5                 (2)  90 percent of the interest shall be credited to

 9-6     the special or separate account.  [The county auditor on behalf of

 9-7     the commissioners court or, if there is no county auditor, the

 9-8     county treasurer shall deposit the amount of compensation in the

 9-9     general fund of the county.]

9-10           SECTION 14.  Section 117.055, Local Government Code, is

9-11     amended to read as follows:

9-12           Sec. 117.055.  COUNTY EXPENSES PAID FROM FEES.  (a)  To

9-13     compensate the county for the accounting and administrative

9-14     expenses incurred in handling the registry [trust] funds that have

9-15     not earned interest, including funds in a special or separate

9-16     account, [for the benefit of litigants in civil proceedings,] the

9-17     clerk shall, at the time of withdrawal, deduct from the amount of

9-18     the withdrawal [county may collect from the nonprevailing party in

9-19     the litigation or from the party the court designates] a fee in an

9-20     amount equal to five percent of the withdrawal but  that  may not

9-21     exceed [set by the commissioners court, but not to exceed] $50.

9-22     [The fee is in addition to any fees the district clerk collects as

9-23     authorized by statute or court order.]

9-24           (b)  A fee collected under this section [The county

9-25     treasurer] shall be deposited [deposit the fee] in the general fund

9-26     of the county.

9-27           SECTION 15.  Section 117.057, Local Government Code, is

 10-1    amended to read as follows:

 10-2          Sec. 117.057.  NEW BOND.  (a)  A commissioners court may

 10-3    require a depository selected under Subchapter B  to execute a new

 10-4    bond whenever the commissioners court considers it necessary for

 10-5    the protection of the county clerk's and the district clerks'

 10-6    registry [trust] funds.

 10-7          (b)  If a depository does not file a new bond required by an

 10-8    order of the commissioners court within five [15] days after the

 10-9    date a copy of the order is served on the depository, the

10-10    commissioners court may select another depository in the manner

10-11    provided by Subchapter B.

10-12          SECTION 16.  Section 117.058, Local Government Code, is

10-13    amended to read as follows:

10-14          Sec. 117.058.  ACCOUNTING FOR AND DISBURSING REGISTRY [TRUST]

10-15    FUNDS IN COUNTIES WITH POPULATION OF 190,000 OR MORE.  (a)  This

10-16    section applies to a county with a population of 190,000 or more.

10-17          (b)  If the commissioners court of a county provides a

10-18    depository for the registry [trust] funds of the county clerk or

10-19    the district clerk, those officers shall make reports under oath to

10-20    the county auditor to properly reflect all registry [trust] funds

10-21    received and disbursed by the officer, including all money

10-22    remaining on hand at the time of the report.  The county auditor

10-23    shall prescribe the form and frequency of the report.

10-24          (c)  Each check issued for the disbursement of the funds must

10-25    be issued in accordance with the laws providing for registry

10-26    [trust] fund depositories.  Each check must be signed according to

10-27    procedure established by the county auditor [submitted to the

 11-1    county auditor for countersignature] before delivery or payment.

 11-2          [(d)  The county auditor shall countersign the checks only on

 11-3    written evidence of the order of the judge of the court in which

 11-4    the funds have been deposited that authorizes the disbursement of

 11-5    the funds.]

 11-6          SECTION 17.  Section 117.081, Local Government Code, is

 11-7    amended to read as follows:

 11-8          Sec. 117.081.  LIABILITY OF COUNTY AND DISTRICT CLERKS.

 11-9    (a)  A county clerk or a district clerk is not responsible for a

11-10    loss of registry [trust] funds resulting from the failure or

11-11    negligence of a depository.

11-12          (b)  This section does not release a county clerk or a

11-13    district clerk from:

11-14                (1)  liability for a loss of registry [trust] funds

11-15    resulting from the clerk's official misconduct, negligence, or

11-16    misappropriation of the funds; or

11-17                (2)  responsibility for keeping the registry [trust]

11-18    funds safe until the clerk deposits them in a depository selected

11-19    under Subchapter B.

11-20          (c)  After a county clerk or a district clerk deposits in a

11-21    depository selected under Subchapter B the registry [trust] funds

11-22    held by the clerk, the clerk is relieved of the responsibility for

11-23    keeping the funds secure [safe].

11-24          SECTION 18.  Section 117.083, Local Government Code, is

11-25    amended to read as follows:

11-26          Sec. 117.083.  LOSS OF REGISTRY [TRUST] FUNDS.  If registry

11-27    [trust] funds held by a county clerk or a district clerk and

 12-1    deposited by the county with a depository selected under Subchapter

 12-2    B are lost for any reason, including a loss due to the insolvency

 12-3    of the depository, the county is liable to the rightful owner of

 12-4    the funds for the full amount of the funds due the owner.

 12-5          SECTION 19.  Section 117.084, Local Government Code, is

 12-6    amended to read as follows:

 12-7          Sec. 117.084.  [FAILURE OF] DEPOSITORY TO PAY CHECK ON

 12-8    PRESENTMENT.  A depository selected under Subchapter B shall pay a

 12-9    check drawn against funds deposited with the depository in a

12-10    special or separate account on presentation of the check if the

12-11    funds that are subject to the check are in the possession of the

12-12    depository [that does not pay a check under Section 117.056 shall

12-13    forfeit and pay to the holder 10 percent of the amount of the

12-14    check].

12-15          SECTION 20.  Section 117.121(a), Local Government Code, is

12-16    amended to read as follows:

12-17          (a)  Money may be paid from the registry fund only on checks

12-18    or drafts signed by the district clerk on the written order of the

12-19    court with proper jurisdiction, except that an appeal bond shall be

12-20    paid without a written order on the receipt of a mandate or a

12-21    dismissal.

12-22          SECTION 21.  Section 142.004, Property Code, is amended by

12-23    amending the heading and Subsection (a) and adding Subsection (d)

12-24    to read as follows:

12-25          Sec. 142.004.  INVESTMENT OF FUNDS [IN INSURED FINANCIAL

12-26    INSTITUTIONS].  (a)  In a suit in which a minor or incapacitated

12-27    person who has no legal guardian is represented by a next friend,

 13-1    any money recovered by the plaintiff, if not otherwise managed

 13-2    under this chapter, may be invested:

 13-3                (1)  by the next friend [or the clerk of the court]

 13-4    in[:]

 13-5                [(1)  savings accounts or certificates of a savings and

 13-6    loan association domiciled in this state and insured by the

 13-7    F.S.L.I.C.; or]

 13-8                [(2)]  interest-bearing time deposits in a financial

 13-9    institution [bank] doing business in this state and insured by the

13-10    F.D.I.C.; or

13-11                (2)  by the clerk of the court, on written order of the

13-12    court of proper jurisdiction, in:

13-13                      (A)  interest-bearing deposits in a financial

13-14    institution doing business in this state that is insured by the

13-15    Federal Deposit Insurance Corporation;

13-16                      (B)  United States treasury bills;

13-17                      (C)  an eligible inter-local investment pool that

13-18    meets the requirements of Sections 2256.016, 2256.017, and

13-19    2256.019, Government Code; or

13-20                      (D)  a no-load money market mutual fund, if the

13-21    fund:

13-22                            (i)  is regulated by the Securities and

13-23    Exchange Commission;

13-24                            (ii)  has a dollar weighted average stated

13-25    maturity of 90 days or fewer; and

13-26                            (iii)  includes in its investment

13-27    objectives the maintenance of a stable net asset value of $1 for

 14-1    each share.

 14-2          (d)  Interest earned on an account invested by the clerk of

 14-3    the court shall be paid in the same manner as interest earned on an

 14-4    account under Chapter 117, Local Government Code.

 14-5          SECTION 22.  Section 51.605(c), Government Code, is amended

 14-6    to read as follows:

 14-7          (c)  A clerk must annually [successfully] complete 20 hours

 14-8    of continuing education courses, including at least three hours of

 14-9    continuing education courses regarding registry funds handled under

14-10    Chapter 117, Local Government Code, in the performance of the

14-11    duties of office  [at least one time in each 24-month period].

14-12          SECTION 23.  Section 2256.004, Government Code, is amended to

14-13    read as follows:

14-14          Sec. 2256.004.  APPLICABILITY.  This subchapter does not

14-15    apply to:

14-16                (1)  a public retirement system as defined by Section

14-17    802.001;

14-18                (2)  state funds invested as authorized by Section

14-19    404.024;

14-20                (3)  an institution of higher education having total

14-21    endowments of at least $95 million in book value on May 1, 1995;

14-22    [or]

14-23                (4)  funds invested by the Veterans' Land Board as

14-24    authorized by Chapter 161, 162, or 164, Natural Resources Code; or

14-25                (5)  registry funds deposited with the county or

14-26    district clerk under Chapter 117, Local Government Code.

14-27          SECTION 24.  Sections 117.051 and 117.082, Local Government

 15-1    Code, are repealed.

 15-2          SECTION 25.  (a)  This Act takes effect September 1, 1997.

 15-3          (b)  Sections 117.054 and 117.055, Local Government Code, as

 15-4    amended by this Act, and Section 142.004, Property Code, as amended

 15-5    by this Act, apply to all registry funds, special accounts, or

 15-6    separate accounts, as defined by Section 117.001, Local Government

 15-7    Code, as amended by this Act, held by a county clerk, a district

 15-8    clerk, or a county and district clerk on the effective date of this

 15-9    Act.

15-10          SECTION 26.  The importance of this legislation and the

15-11    crowded condition of the calendars in both houses create an

15-12    emergency and an imperative public necessity that the

15-13    constitutional rule requiring bills to be read on three several

15-14    days in each house be suspended, and this rule is hereby suspended.