S.B. No. 1304

UNCLAIMED FUNDS IN REGISTRY OF COURT

Effective Date: September 1, 1997

AN ACT

relating to funds tendered into the registry of the court.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1.  Section 117.001, Local Government Code, is amended to read as follows:

Sec. 117.001.  DEFINITIONS [DEFINITION]. In this chapter: [,]

(1)  "Bank [bank]" means a banking corporation or association, an individual banker, or a state or federal savings and loan association or savings bank.

(2)  "Clerk" means a county clerk, a district clerk, or a county and district clerk.

(3)  "Registry funds" means funds tendered to the clerk for deposit into the registry of the court.

(4)  "Separate account" means funds transferred from a special account into a separate interest-bearing account.

(5)  "Special account" means an account in a depository in which registry funds are placed.

SECTION 2.  Section 117.002, Local Government Code, is amended to read as follows:

Sec. 117.002.  TRANSFER OF UNCLAIMED FUNDS TO STATE TREASURER. Any funds deposited under this chapter, except cash bail bonds, that are presumed abandoned under Chapter 72, 73, or 75, Property Code, shall be reported and delivered by the county or district clerk to the state treasurer without further action by any court. The dormancy period for funds deposited under this chapter begins on the later of:

(1)  the date of entry of final judgment or order of dismissal in the action in which the funds were deposited;

(2)  the 18th birthday of the minor for whom the funds were deposited; or

(3)  a reasonable date established by rule by the state treasurer to promote the public interest in disposing of unclaimed funds.

SECTION 3.  Subchapter A, Chapter 117, Local Government Code, is amended by adding Section 117.003 to read as follows:

Sec. 117.003.  COMPLIANCE WITH FEDERAL TAX LAW FOR FUNDS HELD UNDER THIS CHAPTER. (a)  If any funds deposited under this chapter are placed into an interest-bearing account, any person with a taxable interest in funds deposited to such account must submit appropriate tax forms and provide correct information to the district or county clerk so that the interest earned on such funds can be timely and appropriately reported to the Internal Revenue Service. The information and forms provided to the district or county clerk under this section are not subject to public disclosure except to the extent necessary to effectuate compliance with federal tax law requirements.

(b)  The district or county clerk is authorized to pay any or all of the interest earned on funds deposited under this chapter, without court order, to the Internal Revenue Service to satisfy tax withholding requirements.

SECTION 4.  Subsections (a) and (c), Section 117.021, Local Government Code, are amended to read as follows:

(a)  The commissioners court of a county at its May regular term after a general election for state and county officers shall receive an application from a federally insured [any] bank or banks in the county to be the depository for a special account [trust funds] held by the county clerk and the district clerks. The county shall contract with a federally insured bank or banks under this section for a two-year or four-year contract term. The contract may, on request by the clerk and approval of the commissioners court, include a provision that the funds in a special account earn interest. A request from the clerk that an account earn interest must be made, in writing, to the commissioners court not later than the 30th day before the date the county gives notice under Section 117.022 and shall be entered in the minutes of the court.

(c)  A bank must file its application on or before 10 a.m. on the first day of the term. The application must be accompanied by a certified check or cashier's check for at least one-half of one percent of the average daily balance of the registry [trust] funds held by the county clerk and the district clerk [clerks] during the preceding calendar year, as determined by the county clerk and the district clerk on or before the 10th day before the date the application is required to be filed. A certified check or cashier's check that complies with this section is a good-faith guarantee on the part of the applicant that if its application is accepted it will execute the bond required under this subchapter. If the bank selected as depository does not provide the bond, the county shall retain the amount of the check as liquidated damages and the county shall select another depository as provided by this subchapter.

SECTION 5.  Section 117.022, Local Government Code, is amended to read as follows:

Sec. 117.022.  NOTICE [NOT REQUIRED]. A county shall [is not required to] advertise or give notice that the county will accept applications to be the depository for registry [trust] funds held by the county clerk and the district clerk in the same manner as notice is required under Section 116.022 [clerks].

SECTION 6.  Subsection (a), Section 117.023, Local Government Code, is amended to read as follows:

(a)  At 10 a.m. on the first day of each term at which the commissioners court is required to receive applications to serve as the depository for registry [trust] funds held by the county clerk and the district clerk [clerks], the commissioners court shall enter the applications in the minutes of the court and select a depository.

SECTION 7.  Section 117.025, Local Government Code, is amended to read as follows:

Sec. 117.025.  DESIGNATION OF DEPOSITORY. (a)  After a bank selected to be a depository under this subchapter qualifies under Section 117.024 and is selected by the commissioners court, the commissioners court shall by an order entered in its minutes designate the bank or banks as the depository for the registry [trust] funds.

(b)  A designation under Subsection (a) is effective until the designation and qualification of a successor depository or until April 15 following the term in which a depository must be selected under this subchapter, whichever is earlier. If the term of a depository ends before the designation and qualification of a successor, the depository shall pay to the clerk in whose name the account is carried all registry [trust] funds due or on deposit.

(c)  A designated depository shall provide security for the funds deposited into the registry fund accounts in the same manner as Subchapter C, Chapter 116.

SECTION 8.  Subsection (a), Section 117.026, Local Government Code, is amended to read as follows:

(a)  The commissioners court may select a federally insured bank or banks located outside the county to serve as the depository under this subchapter if:

(1)  for any reason no bank located in the county applies to be designated as the depository;

(2)  an application is not made for the entire amount of the registry [trust] funds;

(3)  the commissioners court rejects all the applications submitted;

(4)  a depository selected by the commissioners court fails to qualify;

(5)  a depository becomes insolvent; or

(6)  a new depository is selected because of the failure of the regular depository to execute a new bond under Section 117.057.

SECTION 9.  Section 117.027, Local Government Code, is amended to read as follows:

Sec. 117.027.  FAILURE TO SELECT DEPOSITORY. If the commissioners court has not selected a depository under this subchapter, a clerk holding money, an evidence of debt, an instrument of writing, or any other article deposited into [in] the registry of the [clerk's] court pending the result of a legal proceeding shall seal the article in a secure package and deposit the package in an iron safe or a bank vault.

SECTION 10.  Subchapter B, Chapter 117, Local Government Code, is amended by adding Section 117.028 to read as follows:

Sec. 117.028.  APPLICATION OF COUNTY DEPOSITORY LAW. Except as otherwise expressly stated, the provisions of Chapter 116 relating to county depositories also apply to a depository selected under this chapter.

SECTION 11.  Section 117.052, Local Government Code, is amended to read as follows:

Sec. 117.052.  DEPOSITS OF REGISTRY [TRUST] FUNDS BY COUNTY AND DISTRICT CLERKS. (a)  If a depository has been selected under Subchapter B, a county clerk or a district clerk who is to have for more than three days legal custody of money deposited in the registry of the court pending the result of a legal proceeding shall deposit the money in the depository.

(b)  The funds deposited shall be carried at the depository selected under this chapter as a special [trust fund] account in the name of the clerk making the deposit.

(c)  A clerk is responsible for funds deposited into the registry fund from the following sources:

(1)  funds of minors, lunatics, idiots, or persons determined to be non compos mentis;

(2)  funds tendered in an interpleader action;

(3)  funds paid in satisfaction of a judgment;

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

(5)  cash bonds;

(6)  cash bail bonds;

(7)  funds in an eminent domain proceeding; and

(8)  any other funds tendered to the clerk for deposit into the registry of the court.

SECTION 12.  Subchapter C, Chapter 117, Local Government Code, is amended by adding Section 117.0521 to read as follows:

Sec. 117.0521.  CUSTODIANSHIP. A clerk shall act only in a custodial capacity in relation to a registry fund, a special account, or a separate account. A clerk is not a trustee for the beneficial owner and does not assume the duties, obligations, or liabilities of a trustee for a beneficial owner.

SECTION 13.  Section 117.053, Local Government Code, is amended to read as follows:

Sec. 117.053.  WITHDRAWAL OF FUNDS. (a)  If a commissioners court selects a new depository under Subchapter B, when the depository qualifies, the county clerk and the district clerk [clerks] shall transfer the funds in a special account [trust funds] from the old depository to the new depository, and the clerks may draw checks on the accounts for this purpose.

(b)  Except as provided by Subsection (a), a clerk may not draw a check on special account [trust] funds held by a depository except to pay a person entitled to the funds. The payment must be made under an order of the court of proper jurisdiction in which the funds were deposited except that an appeal bond shall be paid without a written order of the court on receipt of mandate or dismissal and funds deposited under Section 887, Texas Probate Code, may be paid without a written order of the court. The clerk shall place on the check the style and number of the proceeding in which the money was deposited with the clerk.

(c)  The clerk shall transfer any registry funds into a separate account when directed to by a written order of a court of proper jurisdiction or when the clerk is required to under Section 887, Texas Probate Code. The clerk shall transfer the funds into a separate account in:

(1)  interest-bearing deposits in a financial institution doing business in this state that is insured by the Federal Deposit Insurance Corporation;

(2)  United States treasury bills;

(3)  an eligible interlocal investment pool that meets the requirements of Sections 2256.016, 2256.017, and 2256.019, Government Code; or

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

(A)  is regulated by the Securities and Exchange Commission;

(B)  has a dollar weighted average stated maturity of 90 days or fewer; and

(C)  includes in its investment objectives the maintenance of a stable net asset value of $1 for each share [A depository shall release funds placed in time deposits under Section 117.051 if the funds are required before maturity, but the depository is not liable for interest earned on the amount withdrawn].

SECTION 14.  Section 117.054, Local Government Code, is amended to read as follows:

Sec. 117.054.  COUNTY EXPENSES PAID FROM INTEREST [ON TIME DEPOSITS]. (a)  If a special or separate account earns interest, the clerk, at the time of withdrawal, shall pay in a manner directed by a court with proper jurisdiction the original amount deposited into the registry of the court and any interest credited to the account in the manner calculated in Subsection (b) [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 interest earned on a special account or a separate account shall be paid in the following amounts:

(1)  10 percent of the interest shall be paid to the general fund of the county to compensate the county for the accounting and administrative expenses of maintaining the account; and

(2)  90 percent of the interest shall be credited to the special or separate account.[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 15.  Section 117.055, Local Government Code, is amended to read as follows:

Sec. 117.055.  COUNTY EXPENSES PAID FROM FEES. (a)  To compensate the county for the accounting and administrative expenses incurred in handling the registry [trust] funds that have not earned interest, including funds in a special or separate account, [for the benefit of litigants in civil proceedings,] the clerk shall, at the time of withdrawal, deduct from the amount of the withdrawal [county may collect from the nonprevailing party in the litigation or from the party the court designates] a fee in an amount equal to five percent of the withdrawal but that may not exceed [set by the commissioners court, but not to exceed] $50. [The fee is in addition to any fees the district clerk collects as authorized by statute or court order.]

(b)  A fee collected under this section [The county treasurer] shall be deposited [deposit the fee] in the general fund of the county.

SECTION 16.  Section 117.057, Local Government Code, is amended to read as follows:

Sec. 117.057.  NEW BOND. (a)  A commissioners court may require a depository selected under Subchapter B to execute a new bond whenever the commissioners court considers it necessary for the protection of the county clerk's and the district clerk's registry [clerks' trust] funds.

(b)  If a depository does not file a new bond required by an order of the commissioners court within five [15] days after the date a copy of the order is served on the depository, the commissioners court may select another depository in the manner provided by Subchapter B.

SECTION 17.  Section 117.058, Local Government Code, is amended to read as follows:

Sec. 117.058.  ACCOUNTING FOR AND DISBURSING REGISTRY [TRUST] FUNDS IN COUNTIES WITH POPULATION OF 190,000 OR MORE. (a)  This section applies to a county with a population of 190,000 or more.

(b)  If the commissioners court of a county provides a depository for the registry [trust] funds of the county clerk or the district clerk, those officers shall make reports under oath to the county auditor to properly reflect all registry [trust] funds received and disbursed by the officer, including all money remaining on hand at the time of the report. The county auditor shall prescribe the form and frequency of the report.

(c)  Each check issued for the disbursement of the funds must be issued in accordance with the laws providing for registry [trust] fund depositories. Each check must be signed according to procedure established by the county auditor [submitted to the county auditor for countersignature] before delivery or payment.

[(d)  The county auditor shall countersign the checks only on written evidence of the order of the judge of the court in which the funds have been deposited that authorizes the disbursement of the funds.]

SECTION 18.  Section 117.081, Local Government Code, is amended to read as follows:

Sec. 117.081.  LIABILITY OF COUNTY AND DISTRICT CLERKS. (a)  A county clerk or a district clerk is not responsible for a loss of registry [trust] funds resulting from the failure or negligence of a depository.

(b)  This section does not release a county clerk or a district clerk from:

(1)  liability for a loss of registry [trust] funds resulting from the clerk's official misconduct, negligence, or misappropriation of the funds; or

(2)  responsibility for keeping the registry [trust] funds safe until the clerk deposits them in a depository selected under Subchapter B.

(c)  After a county clerk or a district clerk deposits in a depository selected under Subchapter B the registry [trust] funds held by the clerk, the clerk is relieved of the responsibility for keeping the funds secure [safe].

SECTION 19.  Section 117.083, Local Government Code, is amended to read as follows:

Sec. 117.083.  LOSS OF REGISTRY [TRUST] FUNDS. If registry [trust] funds held by a county clerk or a district clerk and deposited by the county with a depository selected under Subchapter B are lost for any reason, including a loss due to the insolvency of the depository, the county is liable to the rightful owner of the funds for the full amount of the funds due the owner.

SECTION 20.  Section 117.084, Local Government Code, is amended to read as follows:

Sec. 117.084.  [FAILURE OF] DEPOSITORY TO PAY CHECK ON PRESENTMENT. A depository selected under Subchapter B shall pay a check drawn against funds deposited with the depository in a special or separate account on presentation of the check if the funds that are subject to the check are in the possession of the depository [that does not pay a check under Section 117.056 shall forfeit and pay to the holder 10 percent of the amount of the check].

SECTION 21.  Subsection (a), Section 117.121, Local Government Code, is amended to read as follows:

(a)  Money may be paid from the registry fund only on checks or drafts signed by the district clerk on the written order of the court with proper jurisdiction, except that the clerk may make a payment without court order for unpaid court costs from a cash bond deposited in connection with an appeal after the appellate court issues its mandate in such appeal if the costs remain unpaid for 45 days after the mandate is issued.

SECTION 22.  Section 142.004, Property Code, is amended by amending the heading and Subsection (a) and adding Subsection (d) to read as follows:

Sec. 142.004.  INVESTMENT OF FUNDS [IN INSURED FINANCIAL INSTITUTIONS]. (a)  In a suit in which a minor or incapacitated person who has no legal guardian is represented by a next friend, any money recovered by the plaintiff, if not otherwise managed under this chapter, may be invested:

(1)  by the next friend [or the clerk of the court] in[:

[(1)  savings accounts or certificates of a savings and loan association domiciled in this state and insured by the F.S.L.I.C.; or

[(2)]  interest-bearing time deposits in a financial institution [bank] doing business in this state and insured by the F.D.I.C.; or

(2)  by the clerk of the court, on written order of the court of proper jurisdiction, in:

(A)  interest-bearing deposits in a financial institution doing business in this state that is insured by the Federal Deposit Insurance Corporation;

(B)  United States treasury bills;

(C)  an eligible interlocal investment pool that meets the requirements of Sections 2256.016, 2256.017, and 2256.019, Government Code; or

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

(i)  is regulated by the Securities and Exchange Commission;

(ii)  has a dollar weighted average stated maturity of 90 days or fewer; and

(iii)  includes in its investment objectives the maintenance of a stable net asset value of $1 for each share.

(d)  Interest earned on an account invested by the clerk of the court shall be paid in the same manner as interest earned on an account under Chapter 117, Local Government Code.

SECTION 23.  Subsection (c), Section 51.605, Government Code, is amended to read as follows:

(c)  A clerk must annually [successfully] complete 20 hours of continuing education courses, including at least three hours of continuing education courses regarding registry funds handled under Chapter 117, Local Government Code, in the performance of the duties of office [at least one time in each 24-month period].

SECTION 24.  Section 2256.004, Government Code, is amended to read as follows:

Sec. 2256.004.  APPLICABILITY. This subchapter does not apply to:

(1)  a public retirement system as defined by Section 802.001;

(2)  state funds invested as authorized by Section 404.024;

(3)  an institution of higher education having total endowments of at least $95 million in book value on May 1, 1995; [or]

(4)  funds invested by the Veterans' Land Board as authorized by Chapter 161, 162, or 164, Natural Resources Code; or

(5)  registry funds deposited with the county or district clerk under Chapter 117, Local Government Code.

SECTION 25.  Sections 117.051 and 117.082, Local Government Code, are repealed.

SECTION 26.  (a)  This Act takes effect September 1, 1997.

(b)  Sections 117.054 and 117.055, Local Government Code, as amended by this Act, and Section 142.004, Property Code, as amended by this Act, apply to all registry funds, special accounts, or separate accounts, as defined by Section 117.001, Local Government Code, as amended by this Act, held by a county clerk, a district clerk, or a county and district clerk on the effective date of this Act.

SECTION 27.  The importance of this legislation and the crowded condition of the calendars in both houses create an emergency and an imperative public necessity that the constitutional rule requiring bills to be read on three several days in each house be suspended, and this rule is hereby suspended.


Courtesy of Glenn M. Karisch, Ikard & Golden, P. C., Austin, Texas. This page was last revised on May 19, 1997.