Can a Louisiana clerk sign a bank collateral agreement that limits approval of securities for court registry funds?

Plain-English summary

The St. Bernard Parish Clerk of Court asked whether to sign proposed bank collateral and third-party custodian agreements for money held in the court registry. The Attorney General said the proposed agreements did not comply with Louisiana's local-depository provisions. They restricted the clerk's ability to approve and select the securities securing those deposits. The custodian agreement also appeared to restrict the clerk's rights and remedies in a dispute.

The opinion quotes La. R.S. 39:1222 as requiring the depositing authority to approve pledged securities both as eligible security and as sufficient indemnity. A contract that takes away that review conflicts with the role the statute gives the clerk. The office evaluated the submitted agreements; it did not say that every collateral or custodian agreement is invalid.

Currency note

This opinion was issued in 2006. Later statutory amendments, court decisions, or AG opinions may have changed the rules. Review current law and the actual agreement before relying on this historical conclusion.

What this means for you

Clerks of court and registry-fund managers

Before signing a depository or custodian form, identify who approves the pledged securities and whether the clerk retains meaningful dispute rights. The AG found the submitted forms defective on both points. Keep the proposed terms alongside the statutory security requirements when asking counsel to review them.

Banks and custodians

The clerk's approval role is part of the local-depository rules quoted in the opinion. A proposed form should preserve that role and should not restrict the clerk's remedies in the way the AG flagged in the submitted custodian agreement.

Common questions

Why did the AG reject the proposed agreements?

They limited the clerk's ability to approve and select the forms of collateral used for registry deposits. The proposed third-party custodian agreement also appeared to limit the clerk's rights and remedies in a dispute.

Who was entitled to approve the pledged securities?

The depositing authority. La. R.S. 39:1222, as quoted by the AG, requires its approval that the securities are eligible and sufficient for the statutory indemnity.

Where were court registry funds deposited?

La. R.S. 39:1231, quoted in the opinion, directed them to a bank previously selected by the clerk as fiscal agent, subject to a court rule or order. The opinion also quoted rules on interest-bearing registry accounts and exceptions for certain early expropriation deposits.

Did the AG publish the bank's contract terms in this opinion?

No. The letter says proposed agreements and correspondence were enclosed with the request, but the returned official text does not reproduce them. The opinion describes the provisions it found objectionable without supplying every contract clause.

Background and statutory framework

La. R.S. 39:1231 governed funds in a court registry and the clerk's selected fiscal agent. La. R.S. 39:1222 listed eligible security for public deposits and required approval by the depositing authority. Applying those provisions to the submitted forms, the AG concluded that restrictions on the clerk's collateral approval and apparent restrictions on dispute remedies made the proposed agreements noncompliant.

Citations

• La. R.S. 39:1231 (court registry deposits).
• La. R.S. 39:1222 (security and depositing-authority approval).

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/06-0199

Original opinion text

October 20, 2006
Opinion Number 06-0199
90-A-1 PUBLIC FUNDS & CONTRACTS
La. R.S. 39:1211 et seq; La. R.S. 39:1231; La. R.S.39:1221;
Ms. Lena R. Torres
La. R.S. 39:1222
Clerk of Court, St. Bernard Parish
La. R.S. 39:1211 et. seq. prohibits the Clerk of Court from
P.O. Box 1746
entering into a proposed Public Funds Depositor Collateral
Chalmette, Louisiana 70044
Security Agreement and Third Party Custodian Agreement
since the proposed agreements would limit the clerk of court’s ability to approve the types of securities used for funds
Dear Ms. Torres: deposited in the registry of the court.

On behalf of the St. Bernard Parish Clerk of Court’s Office, you have requested an Attorney General’s opinion regarding whether you should sign a Public Funds Depositor Collateral Security Agreement and a Third Party Custodian Agreement authorizing a change in the pledging of securities for fiduciary funds held for the registry of the court. In connection with your request, you have enclosed copies of correspondence received from Regions Bank as well as a copy of the proposed Public Funds Depositor Collateral Security Agreement and Third Party Custodian Agreement.

Your request must be addressed in light of the provisions relative to Local Depositories found in Louisiana Revised Statutes 39:1211, et. seq. Louisiana Revised Statute 39:1211 defines local depositing authorities as including all parishes, municipalities, boards, commissions, sheriffs and tax collectors, judges, clerks of court, and any other public bodies or offices of any parish, municipality or township.

Louisiana Revised Statute 39:1231 specifically provides:

A. All funds deposited in the registry of any court or coming into the hands of the clerk of court in any judicial proceedings and not belonging to such officer, shall be deposited in the bank previously selected by the clerk of court as his fiscal agent subject to any rule or order of the court, except in the parish of Orleans, where such funds shall be subject to such rules and regulations as may be prescribed by the judges of the civil district court. The interest earned on all such deposits shall accrue to the party or parties finally decreed to be entitled to the ownership thereof.

B. All funds which are deposited in the registry of any court shall be deposited in interest-bearing accounts in any bank or savings and loan association previously selected by the clerk of court as his fiscal agent; however, in no case shall funds deposited in the registry of the any court pursuant to an expropriation by declaration of taking or pursuant

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Opinion Number 06-0199
Lena R. Torres, Clerk of Court
St. Bernard Parish Clerk of Court’s Office
Page -2-

to any acquisition of property prior to judgment as provided by law be required to be deposited in an interest-bearing account as provided herein until thirty days after receipt by the court. Except as provided in R.S. 13:475 (B) the interest earned on all such deposits shall accrue to the party or parties finally decreed to be entitled to the funds deposited.

With respect to security of deposits in the registry of any court, Louisiana Revised Statute 39:1222, provides:

Local depositing authorities shall require as security for deposits:

(1) Bonds or other interest-bearing securities of the United States, or any agency thereof, including but not limited to the Federal National Mortgage Association, or bonds or other interest-bearing obligations guaranteed fully or partially as to principal and interest by the United States, or by any agency thereof; or bonds of any possession of the United States; or unmatured bonds of this state, including both direct and indirect obligations and also, including bonds or other interest-bearing obligations, whether supported by revenue or by the avails of taxes, of the State of Louisiana or of any agency, board, commission, department or division thereof or of any agency, public corporation or authority created by or recognized by the State of Louisiana; or unmatured bonds of any parish, municipality, levee board, road district, school board or school district of this state; or bonds of any parish, municipality, industrial district or industrial board which are secured by a lease executed in accordance with the provisions of Article XIV, Section 14, Paragraphs b.2 or b.3 of the Constitution of the State of Louisiana for the year 1921 [FN1] or R.S.
39:1001 et seq. or R.S. 51:1151 et seq., as amended, and partially or fully guaranteed by the Louisiana Board of Commerce and Industry in accordance with the provisions of the Bond Lease Guarantee Act of the regular session of the Louisiana Legislature of 1968.

(2) Certificates of indebtedness, including paving certificates, of any subdivision of this state referred to in Sub-section (1) of this Section.

(3) Promissory notes either of the authority letting the deposits or of any other authority referred to in Sub-section (1) of this Section, which notes must be either unmatured or payable on demand.

(4) Evidence of participation in such promissory notes issued by any bank, trust company, or recognized bank clearing house association domiciled in this state.

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Opinion Number 06-0199
Lena R. Torres, Clerk of Court
St. Bernard Parish Clerk of Court’s Office
Page -3-

(5) Notes representing loans to students which are guaranteed by the Louisiana Higher Education Assistance Commission in accordance with a contract agreement between the lender and the commission under the provisions of R.S. 17:3021 et seq.

(6) Deposit guaranty bonds underwritten and guaranteed by an insurance company, licensed to do business in this state, listed as an approved surety by the United States Department of the Treasury, that provide coverage for deposits of depositing authorities in excess of the amounts insured by the Federal Deposit Insurance Corporation or any other governmental agency insuring bank or other financial institution deposits that is organized under the laws of the United States, and the form and content of which are approved in advance by the state treasurer.

Furthermore, Louisiana Revised Statute 39:1222, provides that “[w]here any fiscal authority elects to deposit as security any bonds, certificates of indebtedness, paving certificates, promissory notes, evidence of participation in promissory notes or other interest-bearing securities or obligations, these securities shall be approved by the depositing authority as being eligible as security under the terms of this Part and as being sufficient for the indemnity contemplated by this Part”. (Emphasis Added).

After review of the materials provided with your request, it is the opinion of this office that the proposed Public Funds Depositor Collateral Security Agreement and Third Party Custodian Agreement do not comply with the statutory provisions relative to Local Depositories. The proposed agreements contain provisions which limit the Clerk of Court’s ability to approve and select the forms of securities used for funds deposited in the registry of the court. Further, the proposed Third Party Custodian Agreement contains provisions which appear to limit and restrict the Clerk of Court’s rights and remedies with respect to any dispute arising out of the proposed Third Party Custodian Agreement.

We trust this adequately responds to your request.

Yours very truly,

CHARLES C. FOTI, JR.
Attorney General

BY: ________
MICHAEL J. VALLAN
Assistant Attorney General

CCF, JR/MJV/crt

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Opinion Number 06-0199
Syllabus

90-A-1 PUBLIC FUNDS & CONTRACTS
La. R.S. 39:1211 et seq; La. R.S. 39:1231; La. R.S.39:1221; La. R.S. 39:1222

La. R.S. 39:1211 et. seq. prohibits the Clerk of Court from entering into a proposed Public Funds Depositor Collateral Security Agreement and Third Party Custodian Agreement since the proposed agreements would limit the clerk of court’s ability to approve the types of securities used for funds deposited in the registry of the court.

Lena R. Torres, Clerk of Court
St. Bernard Parish
P.O. Box 1746
Chalmette, Louisiana 70044

Date Received:

Date Released: October 20, 2006

Michael J. Vallan
Assistant Attorney General